Author: Joel Kotkin

California’s Demographic Dilemma: A Class And Culture Clash

The newly released Census reports reveal that California faces a profound gap between the cities where people are moving to and the cities that hold all the political power. It is a tale that divides the state between its coastal metropolitan regions that dominate the state’s politics — particularly the San Francisco Bay Area, but also Los Angeles — and its still-growing, largely powerless interior regions.

Indeed, the “progressives” of the coast are fundamentally anti-growth, less concerned with promoting broad-based economic growth — despite 12.5% statewide unemployment — than in preserving the privileges of their sponsors among public sector unions and generally affluent environmentalists. This could breed a big conflict between the coastal idealists and the working class and increasingly Latino residents in the more hardscrabble interior, whose economic realities are largely ignored by the state’s government.

The Census shows that the Bay Area and Los Angeles are growing at their slowest rate in over 160 years under American rule. Between 2000 and 2010 Los Angeles gained less population than in any decade since the 1890s. Its growth rate was slower than metropolitan Chicago, St. Louis and virtually every region that has reported to date, with the exception of New Orleans.

This reflects not only the poor economy of the past few years, but also a widely cited drop-off in foreign immigration and continued massive outmigration of residents to other states. One reason for this mass exodus may be soaring house prices — largely the product of strong regulatory restraints — which appear to have contributed to slowing population growth after 2003.

Yet not all of California is stagnating demographically. The state’s interior region — what I call “The Third California” — is growing steadily. While Orange County, Los Angeles, San Francisco, San Jose and the Silicon Valley increased their population by only 6% or less over the last decade, inland areas such as Riverside-San Bernardino, Sacramento and the Central Valley saw growth of 20% or more. Overall, the interior counties together gained 2 million residents , roughly twice as many as the combined coastal metropolitan areas.

The reasons for this growth are not difficult to comprehend. In boom times and hard times, housing prices in the coastal regions tend to equal as much as seven or eight times a median family income. The prices in the interior can be three times or less.

In addition, during the past two decades, the interior region enjoyed fairly strong economic growth. Pro-business county governments promoted the expansion not only of housing, which boosted construction, but of basic industries such as food processing, manufacturing and warehousing. According to economist John Husing, the Inland Empire alone accounted for over 40% of the state’s total job growth.

Today, in the wake of the collapsed housing bubble, these interior counties are reeling, with double-digit unemployment (in some cases reaching closer to 20%) and what appear to be diminishing prospects. Five of the nation’s 10 metro areas for foreclosures are located in California’s interior.

Under normal circumstances, lower housing prices and business costs would lead — as in past recessions — to a spate of new economic growth, but this the radical turn in California government could keep these areas permanently poor.

Essentially, the Third California has become hostage to the coastal cities and their increasingly bizarre economic policies. Under first Arnold Schwarzenegger and now Jerry Brown, California has embraced a series of radical environmental edicts that spell disaster for the more blue-collar interior. These include dodgy land use policies designed to combat “climate change” but essentially seek to steer middle- and working-class Californians out of their cherished suburban homes and into densely packed urban apartment complexes.

The last election confirmed the Bay Area’s ascendency in Sacramento. Gov. Jerry Brown was previously mayor of Oakland (a city that actually lost population this decade), while the lieutenant governor, former San Francisco Mayor Gavin Newsom, and the new attorney general, Kamala Harris, are from the city by the Bay. The San Francisco area’s population may be about the same as the Inland Empire’s, but its political perspective now dominates the state.

Husing describes San Francisco as “a bastion of elitist thinking” due to a large “trustifarian” class who have turned the city into favorite spot for green and fashionably “progressive” think tanks. This thinking is increasingly influential as well in a rapidly changing Silicon Valley. In the past the Valley was a manufacturing powerhouse and had to worry about such things as energy prices, water availability and regulatory relief. But the increasingly dominant information companies such as Apple, Facebook, Twitter, Google and their wannabes are widely unconnected to industrial production in the region. To be sure, they have created a financial bubble in the area that has made some fantastically rich, but according to researcher Tamara Carleton they have contributed very little in new net job creation, particularly for blue-collar or middle-class workers.

There’s a bit of a snob factor here. Fashionable urbanistas extol San Francisco as a role model for the nation. The City, as they call it, has adopted the lead on everything from getting rid of plastic bags and Happy Meals is now considering a ban on circumcision. When it comes to everything from gay rights to bike lanes, no place is more consciously “progressive” than San Francisco. So why should that charmed city care about what happens to farmworkers or construction laborers in not-so-pretty Fresno?

Class and occupational profile also has much to do with this gap between the Californias. Husing notes that the Bay Area has far more people with college degrees (42%) than either Southern California (30%) or the Central Valley (where the percentage is even lower). Green policies that impact blue-collar workers — restraining the growth of the LA port complex, restricting new single-family home construction or cutting off water supplies to farmers — mean little distress for the heavily white, aging and affluent Bay Area ruling circles.

But such moves could have a devastating impact on the increasingly Latino, younger and less well-educated populace of the interior. Outside of the oft-promised green jobs — which Husing calls “more propaganda than economics” — it is these less privileged residents’ employment that is most likely to be exported to other states and countries, places where broad-based economic growth is still considered a worthy thing. “By our ferocious concentration on the environment, we have created a huge issue of social justice,” Husing points out. “We are telling blue collar workers we don’t want you to have a job.”

This all presages what could be the greatest issue facing California — and much of the country — in the decades to come. In places where San Francisco-like fantasy politics preside, expect to witness a growing class and ethnic divide, with consequences that could prove catastrophic to the future of our increasingly diverse society.

This piece originally appeared at Forbes.com

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo by wstera2

March 10, 2011
The Protean Future Of American Cities

The ongoing Census reveals the continuing evolution of America’s cities from small urban cores to dispersed, multi-polar regions that includes the city’s surrounding areas and suburbs. This is not exactly what most urban pundits, and journalists covering cities, would like to see, but the reality is there for anyone who reads the numbers.

To date the Census shows that growth in America’s large core cities has slowed, and in some cases even reversed. This has happened both in great urban centers such as Chicago and in the long-distressed inner cities of St. Louis, Baltimore, Wilmington, Del., and Birmingham, Ala.

This would surely come as a surprise to many reporters infatuated with growth in downtown districts, notably in Chicago, Los Angeles, Denver and elsewhere. For them, good restaurants, bars and clubs trump everything. A recent Newsweek article, for example, recently acknowledged Chicago’s demographic and fiscal decline but then lavishly praised the city, and its inner city for becoming “finally hip.”

Sure, being cool is nice, but the obsession with hipness often means missing a bigger story: the gradual diminution of the urban core as engines for job creation. For example, while Chicago’s Loop has doubled its population to 20,000, it has also experienced a large drop in private-sector employment, which now constitutes a considerably smaller share of regional employment than a decade ago. The same goes for the new urbanist mecca of Portland as well as the heavily hyped Los Angeles downtown area.

None of this suggests, however, that the American urban core is in a state of permanent decline. The urban option will continue to appeal to small but growing segment of the population, and certain highly paid professionals, notably in finance, will continue to cluster there.

But the bigger story — all but ignored by the mainstream media — is the continued evolution of urban regions toward a more dispersed, multi-centered form. Brookings’ Robert Lang has gone even further, using the term “edgeless cities” to describe what he calls an increasingly “elusive metropolis” with highly dispersed employment.

Rather than a cause for alarm, this form of development simply reflects the protean vitality of American urban forms. Two regions, whose results were released last week, reveal these changing patterns. One is the Raleigh region, which has experienced a growth rate of 42%, likely the highest of the nation’s regions with a population over 1 million. This metropolitan area, anchored by universities and technology-oriented industries, is among the lowest-density regions in the country, with under 1,700 persons per square mile, slightly less than Charlotte, Nashville and Atlanta.

Unlike the geographically constrained older urban areas, Raleigh’s historical core municipality experienced strong growth, from 288,000 to 404,000, a gain of 40%. This gain was aided by annexations that added nearly 30% to the area of the municipality (from 113 to 143 square miles). The annexations of recent decades have left the city of Raleigh with an overwhelmingly suburban urban form. In 1950, at the beginning of the post-World War II suburban boom, the city of Raleigh had a population of 66,000, living in a land area of only 11 square miles.

Even here, however, the suburbs (the area outside the city of Raleigh) gained nearly two-thirds of the metropolitan area growth (65%) and now have 64% of the region’s population. Over the last ten years, the suburbs have grown 43%. It is here that much of the economic growth of the Research Triangle has taken place, as companies concentrate in predominately suburban communities such as Cary.

Yet in most demographically healthy urban regions, the growth continues to be primarily in the suburban centers. One particularly relevant example is the Kansas City area, a dynamic region anchoring what we have identified as “the zone of sanity.” Like most American regions, the Kansas City area is growing, but in ways that often do not resemble the fantasies of urban density boosters.

KC’s growth pattern is important and could be a harbinger of what’s to come in this decade. Along with Indianapolis, this resurgent Heartland region is expanding faster than the national average. It is also attracting many talented people, ranking in our top ten list of the country’s “brain magnets,” a performance better than such long-standing talent attractors as Seattle, Portland, San Francisco, and Boston. Between 2007 and 2009, the Kansas City region’s growth in college-educated residents was more than twice the rate of our putative intellectual meccas of New York, Chicago or Los Angeles.

But despite the wishes of some in Kansas City’s traditional establishment, this cannot be interpreted as meaning that the “hip and cool” are being lured en masse to the city’s inner core. Over the past decade, as in most American regions, Kansas City has expanded far more outward than inward. Despite a modest increase in the city’s population of some 18,000 — much of it in the city’s furthest urban boundaries — the city’s population remains below its 1950 high. On the other hand, some 91% of its 200,000 population increase occurred in the suburban periphery.

Critically, it is important to note that this expansion reflects not so much the growth of “bedroom” communities, but a dramatic shift of employment to the periphery. By far the most important center for this new suburban growth in jobs and people lies across the river in Johnson County, Kan.. Over the past decade, Johnson County has accounted for roughly half of the region’s total growth.

Johnson County – which boasts among the highest levels of educated people in the country — also has become the primary locale for many technology and business service firms, with more people commuting into the area than out. This reflects an increasingly suburbanized economic base. Over the past decade the urban core of Jackson County has lost 42,000 jobs, while the surrounding suburbs have grown by 20,000, with the biggest growth in largely exurban Platte County.

So what does this tell us about the future of the American urban region? Certainly the expansion of relatively low-density peripheral areas negates the notion of a ”triumphant” urban core. Dispersion is continuing virtually everywhere, and with it, a movement of the economic center of gravity away from the city centers in most regions.

But in another way these patterns augur a bright future for an expansive American metropolis that, while not hostile to the urban center, recognizes that most businesses and families continue to prefer lower-density, decentralized settings. The sooner urbanists and planners can accommodate themselves to this fact, the sooner we can work on making these new dynamic patterns of residence and employment more sustainable and livable for the people and companies who will continue to gravitate there.

This piece originally appeared at Forbes.com

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Kansas City skyline photo by Tim Samoff

March 7, 2011
What The Census Tells Us About America’s Future

With the release of results for over 20 states, the 2010 Census has provided some strong indicators as to the real evolution of the country’s demography. In short, they reveal that Americans are continuing to disperse, becoming more ethnically diverse and leaning toward to what might be called “opportunity” regions.

Below is a summary of the most significant findings to date, followed by an assessment of what this all might mean for the coming decade.

Point One: America is becoming more suburban.

For much of the past decade, there has been a constant media drumbeat about the “return to the cities.” Urban real estate interests, environmentalists and planners have widely promoted this idea, and it has been central to the ideology of the Obama administration, the most big-city dominated in at least a half century. “We’ve reached the limits of suburban development,” Housing Secretary Shaun Donovan opined last February, “People are beginning to vote with their feet and come back to the central cities.”

Donavan and others cite such things as the energy price spike in the mid-aughts as well as the mortgage crisis as contributing to the “back to the city” trend. Yet in reality the actual numbers suggest that Donavan and his cronies may need a serious reality check. The Census reveals that, contrary to the “back to the city” rhetoric, suburban growth continues to dominate in most regions of the country, constituting between 80% and 100% of all growth in all but three of the 16 metropolitan areas reporting.

This includes sprawling regions like Houston, “smart growth“ areas like Seattle and Portland (where suburbs accounted for more than 80% of all growth over the decade) and Midwestern regions like St. Louis, which like Chicago saw a sharp decline in the urban population. The only exceptions have been Oklahoma City, Austin or San Antonio, with vast expanses still allowing for much of new development to take place within the city limits.

To be sure, no one should pretend that urban fortunes have sunk to their 1970s nadir. Yet overall, central cities, which accounted for a 11% of metropolitan growth in the 1990s, constituted barely 4% of the growth in the last decade. Some core cities, notably Chicago, have shrunk after making gains in the ’90s. Indeed Chicago — the president’s adopted hometown and the poster child of the urban “comeback” — took what analyst Aaron Renn humorously dubbed “a Census shellacking,” losing some 200,000 people, while the outer suburban ring continued to grow and diversify their populations. The Windy City’s population is now down to the lowest level since the 1910 Census.

Point Two: America is becoming more diverse, and the diversity is spreading.

The racial reordering of America is proceeding apace. Nowhere is this more clear than in Texas, where Hispanic and Asian populations have driven much of the state’s demographic growth. Latinos alone now account for roughly 38% of all Texans. Immigration rates in Dallas and Houston are now higher than for Chicago, Washington, Seattle and Atlanta. Texas, notes long-time observer Candace Evans, is becoming the country’s premier laboratory for promoting a successful diversity.

There are other major shifts in ethnic demographics. For one thing, minorities continue to head to the suburban rings around most major cities. African-Americans and even Latinos may be fleeing places like Chicago, but they continue to move in large numbers to suburban locales in surrounding Illinois counties. , especially south of the city. Others appear to have headed to places like the traditional black-opportunity magnet of Atlanta and or other southern hubs, such as Nashville.

Another trend appears to be the migration of ethnic minorities to areas that, in the past, have been primarily white. This is clear in the thriving Indianapolis area, where the African-American population grew by 28% and the Hispanic population by 161%, or some 56,000 souls. Look for more minority growth in such areas which have the advantage of affordable housing, robust economies and better than average job growth.

3. The Shift to “Opportunity Regions”

As the economy slid in the last years of the decade, population growth slowed, particularly in some Sun Belt states, such as Florida and Nevada, that thrived during the bubble. In contrast newcomers flocked to places, notably in the Texas cities, that offered better prospects. Austin, San Antonio, Houston and Dallas-Ft. Worth regions all grew by 20% or more over the decade.

The key here seems to be affordability and jobs. As economist Mark Sharpe has illustrated, Texas private sector job growth last year was 2.7%, compared with 1% nationally. Unfortunately, unemployment remains over 8%, since of this growth was absorbed by newcomers. In contrast, places with the slowest, or negative growth, tend also to be losing jobs. For example, although the residential population of Chicago’s loop tripled in the past decade to 20,000,the famed business district lost almost 65,000 jobs.

But it’s not just Sun Belt cities that are gaining on places like Chicago. Indianapolis has emerged as a different kind of “opportunity region.” It lacks the dynamism and diversity of the Texas cities, but it has continued to attract people from all over the country, including the surrounding rural or old Rust Belt parts of the state. Overall the Indianapolis region grew nearly 15% over the decade, roughly 50% higher than the national average, as much as Portland and more than Seattle.

In contrast, growth seems to be slowing in some formerly hot areas. Population increases for Seattle, Portland and Denver were around 14%, about half the rate of the previous decade. Part of this may have to do with high unemployment, particularly in Oregon, and high housing prices. Still, these three areas continue to grow much faster than regions such as Chicago, St. Louis or Baltimore where growth struggled in the single digits

Possible Long-term Implications

These shifts suggest that the Obama administration might want to rethink its high-density and urban-oriented strategy. Despite all the media focus on an imagined “back to the city” movement, Americans continue to disperse to “opportunity regions” and toward the suburbs. As a result, expect generally conservative-leaning suburbs and exurbs to gain more power after reapportionment and core city influence to decline further.

Yet the Census numbers also have some unsettling aspects for Republicans. The increasing minority population even in heartland states such as Indiana, not to mention Texas, could undermine GOP gains, particularly if the party listens to its strong nativist wing. Diversification in the suburbs could ultimately turn some of these areas to the center or even left.

The new American generation arising in the census will be increasingly diverse. A growing portion will consist of the children of immigrants, and they will be predominately English-speaking. This suggests a more active and engaged minority population, perhaps susceptible to a pro-growth GOP message and the economy of “opportunity regions” but likely hostile to overtly anti-immigrants posturing.

Whatever your politics or economic interests, the Census suggests that the country is changing in dramatic way– if not always in the ways often predicted by pundits, planners or the media. It usually makes more sense to study the actual numbers, than follow the wishful thinking of largely urban-centric, big-city-based and often quite biased analysts.

This piece originally appeared at Forbes.com

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Indianapolis Photo by IndySawmill

February 25, 2011
Obama’s High-Speed Rail Obsession

Perhaps nothing so illustrates President Obama’s occasional disconnect with reality than his fervent advocacy of high-speed rail. Amid mounting pressure for budget cuts that affect existing programs, including those for the inner city, the president has made his $53 billion proposal to create a national high-speed rail network as among his top priorities.

Our President may be an intelligent and usually level-headed man, but this represents a serious case of policy delusion. As Robert Samuelson pointed out in Newsweek, high-speed rail is not an appropriate fit for a country like the U.S. Except for a few areas, notably along the Northeast Corridor, the U.S. just lacks the density that would make such a system work. Samuelson calls the whole idea “a triumph of fancy over fact.”

Arguably the biggest problem with high-speed rail is its extraordinary costs, which would require massive subsidies to keep operating. Unlike the Federal Highway Program, largely financed by the gas tax, high-speed rail lacks any credible source of funding besides taxpayer dollars.

Part of the pitch for high-speed rail is nationalistic. To be a 21st century super power, we must emulate current No. 2 China. But this is a poor reason to indulge in a hugely expensive program when the U.S. already has the world’s most evolved highway, freight rail and airline system.

Also, if the U.S. were to follow the Chinese model, as some have suggested, perhaps it should impose rule from a Washington version of a centralized authoritarian government. After all, dictatorships are often quite adept at “getting things done.” But in a democracy “getting things done” means balancing interests and efficiencies, not following orders from above.

In China high-speed rail is so costly that the trains are too expensive for the average citizen. Furthermore, construction costs are so high the Chinese Academy of Sciences has already warned that its debts may not be payable. This experience with ballooning costs and far lower fare revenues have raised taxpayer obligations in Taiwan and Korea and added to heavily to the national debt in Japan.

The prospect of mounting and uncontrollable costs has led governors to abandon high-speed projects in Ohio, Wisconsin and most recently Florida, where a battle to save the Tampa-Orlando line has begun . In times of budget stress, the idea of building something new, and historically difficult to contain by costs, becomes a hard sell.

Oddly, the leaders of California, faced with one of the worst fiscal positions in the country, are determined to spend several billions on what Sacramento Bee columnist Dan Walters has dubbed a “train to nowhere” for 54 miles between Madera and Corcoran — two unremarkable and remote Central Valley towns. The proposal makes the former Alaska Sen. Ted Stevens’ notorious ”bridges to nowhere” project seem like frugal public policy.

California’s train to nowhere has been justified as part of wider project to construct a statewide system. But the whole idea makes little financial sense: The University of California’s Institute for Transportation describes the high-speed proposal as based on an “inconsistent model” whose ridership projections are simply not “reliable.”

Equally suspect are cost estimates, which have doubled (after adjustment for inflation) from 1999 to $42.6 billion last year and. A new study says that the project could currently cost close to $65 billion. Costs for a ticket from Los Angeles to San Francisco, originally pegged at $55 one way, had nearly doubled by 2009, and now some estimates place it at about to at least a $100 or perhaps much as $190 — considerably more than an advanced-purchase ticket on far faster Southwest Airlines.

There’s growing political opposition to the system as well, and not just among penny-pinching right-wingers. Residents and local officials in the San Francisco Peninsula, a wealthy and reliably liberal portion of Silicon Valley, largely oppose plans to route the line through their communities. This includes some prominent liberal legislators, such as San Mateo’s Assembly Jerry Hill, who has threatened to put high-speed rail back on the ballot if costs start to surpass initial estimates. Another Democrat, California Treasurer Bill Lockyer has doubts that the rail authority will be able to sell the deal to potential bond-buyers due in part to a lack of consistent estimates in ridership or cost.

So why is Obama still so determined to push the high-speed boondoggle? Largely it’s a deadly combination of theology and money. Powerful rail construction interests, notably the German giant Siemens, are spreading cash like mustard on a bratwurst to promote the scheme. Add to that construction unions and the ever voracious investment banks who would love to pocket fees for arranging to sell the bonds and you have interests capable of influencing either party.

Then there’s what might be called the “density lobby” — big city mayors, construction firms and the urban land owners. These magnates, who frequently extort huge public subsidies for their projects, no doubt think it grand to spend billions of public funds on something that might also increase the value of their real estate.

And finally there are the true believers, notably planners, academics, green activists and an army of rail fans. These are people who believe America should be more like Europe — denser, more concentrated in big cities and tied to the rails. “High speed rail is not really about efficient transport,” notes California transit expert and accountant Tom Rubin. “It’s all about shaping cities for a certain agenda.”

Yet despite their power, these forces face mounting obstacles. As transportation expert Ken Orski points out, the balance of power in the House now lies with suburban and rural legislators, whose constituents would not benefit much from high-speed rail. And then there are governors, increasingly Republican and conservative, very anxious not to add potentially huge obligations to their already stressed budgets.

The most decisive opposition, however, could come from those who favor transit spending but understand to the need to prioritize. High-speed rail is far more expensive than such things as fixing current commuter rail and subways or expanding both public and private bus service. Indeed, the money that goes to urban rail often ends up being diverted from other, more cost-effective systems, notably buses.

The choice between high-speed rail and more conventional, less expensive transit has already been presaged in the fight against expanding LA’s expensive rail system by organizations representing bus riders. These activists contend that rail swallows funds that could be spent on buses

Much the same case is being made the San Francisco peninsula. The opponents of high-speed rail on the San Francisco Peninsula are outraged that the state would spend billions on a chancy potential boondoggle when the popular Caltrain commuter rail service is slated to be curtailed or even eliminated.

One can of course expect that anti-spending conservatives will be the biggest cheerleaders for high-speed rail’s decline. But transit advocates may be forced to join the chorus of opposition, in order to steer transit spending towards more basic priorities as buses in Los Angeles, subways in New York or commuter rail in the San Francisco Bay Area.

In an era of tough budgets, and proposed cutbacks on basic services, setting sensible transportation priorities is crucial. Spending billions on a conveyance that will benefit a relative handful of people and places is not just illogical. It’s obscene.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo: Center for Neighborhood Technology

February 18, 2011
A Leg Up: World’s Largest Cities No Longer Homes of Upward Mobility

Throughout much of history, cities have served as incubators for upward mobility. A great city, wrote René Descartes in the 17th century, was “an inventory of the possible,” a place where people could lift their families out of poverty and create new futures. In his time, Amsterdam was that city, not just for ambitious Dutch peasants and artisans but for people from all over Europe. Today, many of the world’s largest cities, in both the developed and the developing world, are failing to serve this aspirational function.

Though leading urban theorists love to celebrate the most rarified parts of the city economy—Saskia Sassen refers to “urban glamour zones” that thrive in what New York Mayor Michael Bloomberg proudly calls the “luxury city”—they tend to forget about working- and middle-class residents. Unfortunately, these urban ideas appear to be contagious, as they’re being applied to the expanding cities of Asia and other developing regions. A recent World Bank report argued that large urban concentrations—the denser, the better—are the most prodigious creators of opportunity and wealth. “To spread out economic growth,” the report claimed, is to discourage it.

A closer look, however, suggests a more nuanced reality. Cities in the developing world are growing, but largely because they’re the only alternative to poverty and even starvation in the countryside. These cities are not only failing to provide opportunities for upward mobility; they’re producing the class inequalities found in “luxury cities” such as London and New York.

Once rigidly egalitarian, China now has some of the world’s highest rates of income inequality. The central cores of Beijing and Shanghai employ legions of well-paid European and American architects and planners, but few concern themselves with the camps inhabited by poor, often temporary workers, who constitute roughly one-fifth of the population and live in conditions more reminiscent of a Brazilian favela than an “urban glamour zone.”

This same stratification is also happening in India. Mumbai, one of the fastest-growing cities, is creating wealth at the top of the economic spectrum but leaving millions of others scrambling for mere subsistence. The New York–based author Suketu Mehta has described his hometown of Mumbai (formerly known as Bombay) as “an urban catastrophe,” an example of the mounting woes of rapidly expanding cities in the developing world. “Bombay is the future of urban civilization on the planet,” he wrote. “God help us.”

A majority of Mumbai’s population now lives in slums, up from one-sixth in 1971—a statistic that reflects a lack of decent affordable housing, even for those gainfully employed. Congested, overcrowded, and polluted, Mumbai has become a difficult place to live. The life expectancy of a Mumbaikar is now seven years shorter than an average Indian’s, a remarkable statistic in a country still populated by poor villagers with little or no access to health care.

In spite of World Bank proclamations, the most rapid urban growth in India is actually occurring in smaller, less dense cities, such as Bangalore and Ahmedabad, places with lower living costs and more business friendly governments. This mirrors a trend occurring in the United States. In the last decade, middle-income people have been moving out of our megacities. Between 2000 and 2008, according to the demographer Wendell Cox, regions of more than ten million people suffered a 10 percent rate of net domestic out-migration. (Often the only reason for population growth in these cities was immigration.) The big gainers were cities between 100,000 and 2.5 million residents: the business-friendly Texas cities Dallas, Houston, and San Antonio; Raleigh and Durham, North Carolina, which now form the fastest-growing metro area in the nation; and the heartland cities of Columbus, Indianapolis, Des Moines, Omaha, Sioux Falls, and Fargo.

One reason for this movement has been the shift of jobs away from the coasts to lower-cost, less dense cities. The fastest growth in middle-income jobs has been concentrated in many of the places listed above: Houston, Dallas, Austin, Raleigh-Durham, and Salt Lake City. This pattern also includes high-tech, science-oriented employment. In contrast, those jobs have been stagnant or shrinking in such cities as New York, Los Angeles, San Francisco, and Chicago.

As a result, America’s largest cities are increasingly divided into three classes: the affluent, the poor, and the nomadic class of young people who generally come to the city for a relatively brief period and then leave. New York, the aspirational city of my grandparents, now has the smallest share of middle-income families in the nation, according to a recent Brookings Institution study, with Los Angeles and San Francisco not far behind. In 1980 Manhattan, New York’s wealthiest borough, ranked 17th among U.S. counties for social inequality; by 2007 Bloomberg’s “luxury city” was first, with the top fifth earning 52 times the income of the lowest fifth, a disparity roughly comparable to that of Namibia.

Similar patterns can be found in Europe, despite its countries’ more developed welfare states. The U.K. has witnessed a relentless centralization of urban functions in London, as once proud cities such as Manchester, Liverpool, Glasgow, and Birmingham have continued their long slide into obscurity and irrelevance. The bulk of London’s growth, however, has not taken place in the central core but in what the historian James Heartfield calls “the greater southeast.” This vast “conurbation” stretches from west of Heathrow Airport to the booming coastal city of Brighton, roughly an hour’s train ride from the“ city center.

As the middle class has decamped, central London has become more stratified. Residents and workers there and in the West End account for some of the most concentrated wealth on the planet. At the same time, prospects for London’s middle class have weakened, with many fleeing to the suburbs or even leaving the country. (Britain remains a large exporter of educated workers to the rest of the world.) The major issue here is the high cost of housing. Even in its poorest neighborhoods, London now ranks as one of the most unaffordable places for middle-income people to buy a home.

Still, life is much tougher for the city’s poor, many of whom live less than an hour’s walk from the wealthiest neighborhoods. Take a stroll just a mile or two from the Thames and you enter a very different London. It is here where you’ll see why the financial capital of the European Union also has the highest incidence of child poverty in Great Britain (more even than in the beleaguered North East). Thirty-six percent of children in London live in poverty, a figure that rises to more than one-half when the city’s housing costs are factored in.

The same split has emerged in other countries considered far more open than class stratified Britain. A recent University of Toronto study found that between 1970 and 2001, the portion of middle-income neighborhoods in the city had dropped from two-thirds to one-third; poor districts had more than doubled to 40 percent. By 2020, middle-class neighborhoods could fall to less than 10 percent, with the balance made up of poor and affluent residents.

Much the same can be seen in continental Europe, a trend greatly exacerbated by the growth of immigration. Unlike Amsterdam in Descartes’s time, Europe’s great cities are failing in their historic mission of incorporating newcomers, as German Chancellor Angela Merkel recently conceded. In Berlin, one fourth of the workforce earns less than 900 euros a month, while 36 percent of children are poor. The city once known as “Red Berlin” has emerged as “the capital of poverty and the ‘working poor’ in Germany,” Emma Bode, a left-wing journalist, wrote in 2008.

Given these global realities, it might be time for our urban boosters to curb their enthusiasm for the “luxury city” and refocus on how to meet the aspirations of their middle- and working-class residents. If they don’t, lack of opportunity will drive more and more of this crucial aspirational class farther and farther away, mostly to smaller cities and suburbs that still offer “an inventory of the possible.”

This piece originally appeared in Metropolis Magazine.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo by Premshree Pillai

February 14, 2011
America’s Biggest Brain Magnets

For a decade now U.S. city planners have obsessively pursued college graduates, adopting policies to make their cities more like dense hot spots such as New York, to which the “brains” allegedly flock.

But in the past 10 years “hip and cool” places like New York have suffered high levels of domestic outmigration. Some boosters rationalize this by saying the U.S. is undergoing a “bipolar migration”–an argument recently laid out by Derek Thompson in The Atlantic. On the one hand the smart “brains” head for cool, coastal cities like New York and Boston, while “families” and “feet”–a term that seems to apply to the less cognitively gifted–trudge to the the nation’s southern tier–a.k.a. the Sun Belt–for cheap prices and warm weather. “College graduates with bachelor’s degrees or higher,” Thompson notes, “have been moving to the coasts, like salmon swimming against the southwesterly current.”

However, this analysis–no matter how widely accepted in the media–is grossly oversimplified, perhaps even misleading. Indeed, college graduates, for the most part, are heading not to the big cities on the coasts, but to smaller, less dense and quite often Sun Belt cities.

To come up with our list of the country’s biggest brain magnets, we took the 52 largest metropolitan areas (all those over 1 million population) and ranked them by gains in people with college educations compared to the population over 25 years of age between 2007 and 2009, using the latest data from the American Community Survey provided by demographer Wendell Cox. It turns out that none of the top 10 gainers were large Northeastern cities, but largely Southern or Midwestern. New Orleans; Raleigh, N.C.; Austin, Texas; Nashville; Birmingham, Ala.; Kansas City, Mo.-Kan.; and Columbus, Ohio, all scored high marks. Only one California city, San Diego, made the top 10. Perennial “brain gainers” Denver, Colo., and Seattle round out the top 10.

Among those metropolitan statistical areas with populations over 5 million, the best ranking went to the Philadelphia region (No. 12 overall), arguably the least glitzy and most affordable of the large northeast cities. The San Francisco metropolitan area, long a leader in its percentage of college-educated adults, held the next spot at No. 13. On the other hand, supposed “brain” magnets Boston and Chicago managed middling rankings, right behind Charlotte, N.C., and just ahead of San Antonio, Texas. Both fell well behind such overlooked “brain gain” areas as Jacksonville, Fla.; St. Louis, Mo.-Ill.; and Indianapolis. New York, the nation’s intellectual capital, ranked a mediocre 29th and Los Angeles an even worse 37th. To put in perspective, Nashville’s rate of college educated migration growth was 3.7%, compared with 1.4% for New York and a measly 0.7% for Los Angeles.

Rather than following a clear path to the world of the “hip and cool,” college graduates appear influenced by a more nuanced and complex series of factors in terms of their location. New Orleans’ No. 1 ranking, for example, is likely product of the continuing recovery of its shrunken population, where the central city appears to be somewhat more attractive to professionals than before Katrina while the suburban populations have recovered more quickly from the disaster. The strong showing of Birmingham may likely be traced not to changes in the core city itself, but to the rapid growth in its surrounding suburban counties and the rapid expansion of the region’s medical complex.

This reflects something not often mentioned: the spreading out of intelligence. Conventional theory suggests that the new generation of college graduates will go to the largest, densest places, eschewing, as The Wall Street Journal put it snidely, their parent’s McMansions for small abodes in the inner city. Yet the ACS numbers indicate that, overall, college migrants tend to choose less dense places. In the two years we covered, the growth rate in urban areas with lower urban area densities (2,500 per square mile) boasted a 5% increase in college-educated residents, compared with roughly 3.5% for areas twice as dense.

This can be seen in the pattern of migration toward relatively low-density metropolitan areas like Nashville, Columbus, Raleigh or Kansas City as opposed to more packed regions like New York, Los Angeles or San Francisco. And wherever these college graduates migrate, they are at least as likely to settle outside the urban core. Another overlooked fact: Most places with the highest percentages of college-educated people are in suburbs. Only two of the 20 most-educated counties in the country are located in the urban core: New York (Manhattan) and San Francisco. Virtually all the rest are suburban.

Another somewhat surprising statistic revolves around affordability and job growth. The college-educated, particularly in this tepid economy, are not immune to reality. They may want to go one place–for example, ever-alluring New York or sunny Los Angeles–but may soon find they can find neither a good job there nor an affordable place to live in order to stay there. Overall our analysis shows that many end up in places with lower housing prices. Areas with the highest price housing experienced college-educated growth at a rate only 60% of those with more affordable real estate. This is one thing that makes an Austin or Raleigh, even a Columbus or Kansas City, more attractive than a Boston, New York or Los Angeles

Finally we have to consider employment trends. For the most part college graduates, like most folks, preferred cities with lower unemployment and more job growth. Some top gainers, such as Raleigh, Columbus and Kansas City, all boast lower than average unemployment and appear to be recovering from the recession. But this is not always the case: Some relatively poor performers on the job front, like Portland, Ore., and San Diego, have managed to maintain their appeal–for now.

As the economy recovers these patterns are likely to accelerate, although they could also shift a bit as regions gain or lose employment momentum. Meanwhile, the best strategy for attracting graduates lies in creating jobs, as well as in offering both affordable housing and a range of housing options, including both reasonably priced urban and lower-density living. Generally speaking an area that is economically vital as well as physically or culturally appealing will do best. In the next decade advantages will also fall to family-friendly regions, particularly as the current crop of millennial-generation graduates starts entering en masse their family-forming years. These factors, more than hipness or dense urbanity, may well be more influential in determining which regions do best in the ongoing war for talent.

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No. 1: New Orleans-Metairie-Kenner, La.

Grad Gain: 36,666

Gain as a Share of Total 25+ 2007 Population: 5.42%

New Orleans’ No. 1 ranking is likely due to former exiles returning after Hurricane Katrina. A recent report from the Census Bureau estimates that area’s population in the past decade has shrunk 29%. Recovery in the urban core has remained patchy, but suburban populations have recovered more quickly from the disaster.

No. 2: Raleigh-Cary, N.C.

Grad gain: 28,748

Gain as a Share of Total 25+ 2007 Population: 4.27%

Even in hard times Raleigh-Durham–the fastest-growing metro area in the country–has repeatedly performed well on Forbes’ list of the best cities for jobs. The area is a magnet for technology companies fleeing the more expensive, congested and highly regulated northeast corridor. Affordable housing and short commute times are no doubt highly attractive to millennials seeking to start a family. Indeed, a 2010 Portfolio.com/bizjournals survey ranked the city the third-best for young adults.

No. 3: Austin-Round Rock, Texas

Grad gain: 42,117

Gain as a Share of Total 25+ 2007 Population: 4.23%

Brains are flocking to Austin for good reason. Forbes ranked it the best large urban area for jobs in 2010. Along with Raleigh-Durham, Austin is emerging as the next Silicon Valley, luring lots of brains who would have previously headed toward the West Coast. Austin owes much both to its public-sector institutions (the state government and the main campus of the University of Texas) and its expanding ranks of private companies–including foreign ones–swarming into the city’s surrounding suburban belt. Its vibrant cultural scene certainly helps in attracting college-educated millennials.

No. 4: Nashville-Davidson-Murfreesboro-Franklin, Tenn.

Grad gain: 36,975

Gain as a Share of Total 25+ 2007 Population: 3.68%

A high quality of life, a vibrant cultural and music scene and a diverse population make Nashville a desirable place to live. Low housing costs drive down the cost of living, which is even lower than in other affordable cities like Raleigh, Austin or Indianapolis. Nashville is also home to a growing health care industry: More than 250 health care companies have operations in Nashville, and 56 are headquartered there.

No. 5: Kansas City, Mo./Kan.

Grad gain: 38,398

Gain as a Share of Total 25+ 2007 Population: 2.96%

The two-state Kansas City region boasts strong population growth and net in-migration– and for good reason. The city has one of the lowest costs of living, one of the highest personal-income growth rates and one of the healthiest real estate markets in the country. Short commute times also add to the attractiveness of the city for families. The city is the second-largest rail hub in the U.S. and is actively growing its life science and technology sectors.

No. 6: Birmingham-Hoover, Ala.

Grad gain: 21,111

Gain as a Share of Total 25+ 2007 Population: 2.86%

Birmingham’s strong showing on this list is likely due to the rapid growth in its surrounding suburban counties. One big development sure to lure brains: the rapid expansion of the University of Alabama’s medical center and surrounding private medical industry.

No. 7: San Diego-Carlsbad-San Marcos, Calif.

Grad gain: 51,151

Gain as a Share of Total 25+ 2007 Population: 2.71%

The only MSA from the "hip and cool" state of California to make the top 10, despite high levels of out-migration and a relatively poor performance in the job front. For now, at least, the area’s beautiful beaches and idyllic weather manage to attract plenty of college graduates, but it will need to get out of its slump in order to retain them.

No. 8: Denver-Aurora-Broomfield, Colo.

Grad gain: 43,853

Gain as a Share of Total 25+ 2007 Population: 2.69%

A perennial magnet for college graduates, and one of the "hip and cool" cities to make the top of our list, Denver was one of the darlings of the information age, and its suburbs have long incubated tech companies. Its technology sector is still strong, but higher prices and greater regulation have driven companies to regions like Austin and Raleigh, which are more business-friendly and cheaper.

No. 9: Columbus, Ohio

Grad gain: 29,515

Gain as a Share of Total 25+ 2007 Population: 2.6%

While the recession has taken a huge toll on the rest of Ohio, Columbus has been thriving, thanks to being home of the state capital, a booming startup culture and the largest college campus in the country–Ohio State University, a major employer and information center. Forbes named the Columbus metropolitan area–home to 1.8 million residents– one of America’s best housing markets, as well as one of the best places for businesses and careers. The city enjoys below-average unemployment and a strong tech presence that includes Battelle Memorial Institute, which oversees laboratories for several federal agencies.

No. 10: Seattle-Tacoma-Bellevue, Wash.

Grad gain: 53,869

Gain as a Share of Total 25+ 2007 Population: 2.39%

Seattle has long been one of the big winners in the brain battle as well. It has some of the country’s most important cutting-edge firms–Microsoft, Costco, Amazon, Starbucks–one of the country’s best arrays of urban and suburban neighborhoods. Housing is no longer cheap, but remains far less expensive than its main rival, the San Francisco Bay Area.

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Photo by Jeanette Runyon

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

February 11, 2011
The Midwest: Coming Back?

Oh my name it is nothing
My age it is less
The country I come from
Is called the Midwest

–Bob Dylan, “With God on Our Side,” 1964

For nearly a half century since the Minnesota-raised Robert Zimmerman wrote those lines, the American Midwest has widely been seen as a “loser” region–a place from which talented people have fled for better opportunities. Those Midwesterners seeking greater, glitzier futures historically have headed to the great coastal cities of Miami, New York, San Diego or Seattle, leaving behind the flat expanses of the nation’s mid-section for the slower-witted, or at least less imaginative.

Today that reality may be shifting. While some parts of the heartland, particularly around Detroit, remain deeply troubled, the Midwest boasts some of the lowest unemployment rates in the country, luring back its native sons and daughters while attracting new residents from all over the country.

For example, Des Moines, Omaha, Kansas City, Columbus, Minneapolis, Milwaukee and Madison have all kept their unemployment rates lower than the national average, according to a recent Brookings survey. They are also among the regions that have been able to cut their jobless rates the most over the past three years.

This contrasts sharply with the travails of the metropolitan economies of the Southeast, Nevada, Arizona and California. Of course, other regions are doing better than the Sun Belt sad sacks. The stimulus and TARP benefited some parts of the Northeast, but even those areas haven’t performed as well as the nation’s mid-section. The only other arc of prosperity has grown around the Washington leviathan, largely a product of an expanded government paid for by the rest of the country.

In contrast, the relative prosperity in parts of the Midwest largely stems from the private sector. Take the rise in the price for agricultural commodities, global energy demand, greater home affordability and a slow but perceptible pickup in domestic manufacturing. According to University of Iowa researcher Jacob Langenfeld, these factors suggest that it’s time to stop seeing the Heartland as a perennial loser and to start seeing it as a “[model] for effective economic development.”

The new reality is reflected in several ways. In terms of personal-income growth last decade, several Midwest regions ranked among the top ten in the U.S., including Milwaukee, Cleveland, Kansas City and Cincinnati.

These cities all performed better than Seattle, Denver or Portland. San Jose and San Francisco, those perennial darlings of the information age, sat around the bottom of the list. The mid-section also boasts many of the nation’s healthiest real estate markets, according to Realtor.com. Three of the top five markets–Kansas City, Kansas, Omaha and Fargo–are located in the region

An analysis of shifting migration patterns provides even more intriguing evidence. Over the past century the Midwest’s share of the nation’s population fell from nearly 35% of the total to barely 21%. Only the Northeast, now less than a fifth of the population, has experienced a similar decline, while the West and South have registered impressive gains.

Now some of the very regions that experienced losses over the past few decades, such as St. Louis, suffer much lower rates of out-migration than a similarly sized area like San Diego. Others, such as Indianapolis, Columbus, Madison and Kansas City, have enjoyed strong rates of domestic migration. In sharp contrast, coastal giants like metropolitan Los Angeles or New York have worse domestic out-migration rates than Detroit.

The outcome of the recent midterm elections means that political changes may further propel the Midwest express. The new Congress is largely dominated by representatives of the heartland such as Speaker John Boehner of Ohio and Budget Committee Chairman Paul Ryan of Wisconsin. This marks a powerful shift from the previous Congress, controlled by iron-fisted coastal Democrats like former Speaker Nancy Pelosi of San Francisco.

We can expect the new Congress to adhere more closely to Midwestern interests on a host of issues. Energy legislation will now reflect the interests of Midwestern states, which depend heavily on coal, rather than the renewable dreams of the coastal big cities. In transportation we may see a shift in priorities from high-speed rail to such mundane things as roads and bridges.

More important still may be changes at the local level. For decades Midwestern governors and mayors tried to emulate the Northeast and West Coast. Historian John Teaford observed that the struggling Midwestern cities in the 1960s and 1970 employed “cookie cutter” redevelopment in a vain effort to replicate the great coastal cities. Ultimately the building of “international style” towers, sports stadia and cultural palaces did little to restore places whose economies had become increasingly uncompetitive.

In recent years, the most risible example of coastal aping could be found in Michigan, the nation’s most economically ravaged state. Under Gov. Jennifer Granholm Michigan focused on a strategy of promoting “cool cities” to lure the young entrepreneurial hipsters away from the coasts. Like California, Michigan placed huge bets on renewable fuels and other green industries.

By the end of Granholm’s term this winter the state suffered one the country’s highest unemployment rates, a falling population and epic out-migration. She has been replaced by a pragmatic pro-business conservative, Rick Snyder, who is focused on a practical economic-development agenda. Similar shifts have taken place in Ohio and Wisconsin.

The new brand of Midwestern realism has been embraced for years by some regions. For example, non-partisan business and civic leaders in Kalamazoo, Mich., have pushed both educational reform and economic diversification. The region, though hardly booming, has done better than the state overall and is experiencing an entrepreneurial and community renaissance.

Kalamazoo entrepreneurs tend to understand that the key to Midwestern renewal lies with the region’s core competencies and attractions. David Zimmermann, founder of Kalexsyn, a flourishing biotech company, identifies these assets: Michigan’s resident pool of skilled labor, a low cost of living and a generally community-oriented, family-friendly atmosphere.

Zimmermann says his company, which now employs 30 workers and has revenues of $5.4 million, has surprisingly little trouble attracting younger skilled workers. The median age at the company, he notes, is only 36, and many have come to Kalamazoo from traditional coastal biotech hot spots. This includes several researchers some who originally left the Midwest in their teens and twenties.

“People are looking at the Midwest and crunching the numbers,” Zimmermann says. “Maybe you take a 20% pay cut from San Francisco but you buy a nice house for $200,000. You come out way ahead. We think this a very strong advantage.”

Such a newfound appreciation for the Midwest represents a critical element in expanding the region’s turnaround. With enhanced power in Washington and more common sense government at home, the Midwest could be poised to regain a competitive advantage that has been missing for several generations.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo by Paladin27

February 1, 2011
Why Affordable Housing Matters

Economists, planners and the media often focus on the extremes of real estate — the high-end properties or the foreclosed deserts, particularly in the suburban fringe. Yet to a large extent, they ignore what is arguably the most critical issue: affordability.

This problem is the focus of an important new study by Demographia. The study, which focuses largely on English-speaking countries, looks at the price of housing relative to household income. It essentially benchmarks the number of years of a region’s household income required to purchase a median-priced house.

Overall, the results are rather dismal in terms of affordability, particularly in what Wharton’s Joe Gyourko dubs “superstar cities.” These places — such as London, New York, Sydney, Toronto and Los Angeles — generally tend to be more expensive than second-tier regions commonly found in the American South and heartland.

Even with their usually higher incomes, these regions, for the most part, still have a ratio of five years median income to median house price; this is far higher than the historical ratio of three. In some areas the ratios are even more stratospheric. Sydney and Melbourne, for example, have ratios over nine; London, New York, San Jose and Los Angeles approach six or more.

Urbanists often assume that these high prices — unprecedented in a tepid economy — reflect the greater attractiveness of these regions. This is somewhat true, particularly for parts of London and New York, which can survive high ratios because their markets are less national and middle-income and more tied to the global upper classes.

In places like Mayfair or New York’s Upper East Side, the buying “public” extends beyond the local market to high-income markets in places like the United Arab Emirates, Moscow, Shanghai, Singapore or Tokyo. Many owners are not full-time residents and consider a home in such places as just another expression of their wealth and privilege.

Yet such markets are exceptional. In most regions, the vast preponderance of homebuyers are either natives or long-term migrants. Their less glamorous tastes — notably access to affordable single-family dwellings — drives migration from one region to another. Over the past decade, and even since the crash, this has meant a general trend of migration from high-end, unaffordable markets to less expensive regions. In the U.S., for example, people have been flocking to the South, particularly the large metropolitan areas of Texas.

One factor driving this migration, the Demographia study reveals, is differing levels of regulation of land use between regions. In many markets advocacy for “smart growth,” with tight restrictions on development on the urban fringe, has tended to drive up prices even in places like Australia, despite the relatively plentiful supply of land near its major cities.

More recently, “smart growth” has been bolstered by claims, not always well founded, that high-density development is better for the environment, particularly in terms of limiting greenhouse gases. Fighting climate change (aka global warming) has given planning advocates, politicians and their developer allies a new rationale for “cramming” people into more dense housing, even though most surveys show an overwhelming preference for less dense, single-family houses in most major markets across the English-speaking world.

Limits on the kind of residential living most people prefer inevitably raises prices. As the Demographia study shows, the highest rise in prices relative to incomes generally has taken place in wherever strong growth controls have been imposed by local authorities.

Perhaps the poster child for “smart growth” has been the U.K. Long before the climate change debate, both of England’s major parties embraced the notion of strict constraints on suburban development — not only in London, but across the country. As a result, even places with weak economies are not as affordable as they should be. Liverpool, Newcastle and the Midlands have affordability rates higher than Toronto, Boston, Miami and Portland — and not much lower than those of New York or Los Angeles.

But the most remarkable impact of “smart growth” policies has been in Australia, which once had among the most affordable housing prices in the English-speaking world. Houses in Sydney and Melbourne, for example, are now less affordable than in London or San Francisco. Even secondary markets like Adelaide and Perth are more expensive than Toronto, New York, Los Angeles or Chicago. Most recently these policies have even caught the attention of the OECD, which linked overly regulated housing markets not only to the Great Recession, but to a continued slow economic recovery.

Compared with the U.K. and Australia, the U.S. housing market is more hopeful, with a host of regions — notably Houston, Dallas, Austin, San Antonio, Phoenix and Kansas City — with affordability rates around three and under. Low prices by themselves, of course, are no guarantor of success; in economically challenged places like Detroit and Cleveland, out-migration and high unemployment have driven prices down.

But in many, if not most, cases affordability has promoted economic and demographic growth. Generally speaking, affordable markets tend to draw migrants from overpriced ones, for example to Houston or Austin from Los Angeles or New York.

Nor is this necessarily a case of “smart” people heading to dense, expensive cities while the less cognitively gifted head to the low-cost regions — as news outlets like The Atlantic have claimed. In fact, the American Community Survey reveals that between 2007 and 2009 college graduates generally gravitated toward lower-cost, less dense markets — such as Austin, Houston and Nashville — than to the highly constrained, denser ones. Overall growth in affordable markets — with a ratio of three or four — among college graduates was roughly 5%; in the more expensive places , it was barely 3%.

How could this be, if everyone with an above-a-room-temperature IQ supposedly favors hip, cool, dense cities? Perhaps it’s because of factors often too small or mundane for urban pundits to acknowledge. Most people, particularly as they enter their 30s, aspire to a middle-class lifestyle — and being able to afford a house constitutes a large part of that.

So what does this tell us about future growth? Clearly affordability matters. Areas that combine strong income and job growth, along with affordable housing, are poised to do best. This will be particularly true once the economy recovers and a new generation of millennial buyers, entering their 30s in huge numbers over the next decade, start their search for a place where they can settle down and start raising families.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo by Je Kemp

January 24, 2011
The Next Urban Challenge — And Opportunity

In the next two years, America’s large cities will face the greatest existential crisis in a generation. Municipal bonds are in the tank, having just suffered the worst quarterly performance in more than 16 years, a sign of flagging interest in urban debt.

Things may get worse. The website Business Insider calculates that as many as 16 major cities — including New York, Los Angeles, Chicago and San Francisco — could face bankruptcy in the next year without major revenue increases or drastic budget cuts. JPMorgan Chase’s Jamie Dimon notes that there have already been six municipal bankruptcies and predicts that we “will see more.”

Big cities face particularly steep challenges. Many, notes the Manhattan Institute’s Steve Malanga, have extraordinarily generous compensation systems for their public employees. New York City, for example, owes nearly $65 billion in municipal debt, as well as a remarkable $122 billion for unfunded pension obligations. President Barack Obama’s hometown of Chicago has it even worse: Its total public pension liability adds up to roughly $42,000 per household.

This all should give some pause to the relentless hoopla about the country’s supposed “urban renaissance.” The roots of the current economic crisis lie deep in urban economies, where employment growth that has lagged even in good times. During the last economic expansion, urban job growth was roughly one-sixth that of suburbs and one-third that of smaller communities.

Population flows are also less favorable than commonly perceived. Even since the onset of the Great Recession, the vast majority of urban regions have seen population continue to grow more robustly in the suburbs than in the urban core. Similarly, the largest increases in the much-coveted educated population continue to be in smaller, less dense urban areas such as Raleigh-Durham, Austin and Nashville and away from the largest, densest regions such as New York or Los Angeles.

True, many cities now boast more residential complexes, often built from abandoned office and industrial space, but there are few new office towers outside the public sector. Stadiums, convention centers, luxury hotels and other ephemera may gain public notoriety, but they have done little to boost the private sector economic base as can be seen in the lack of growth in places like downtown Cleveland, Detroit and Baltimore. In contrast, job growth has flourished in low-density regions in suburban rings, particularly in fast-growing metropolitan regions of the South , particularly in Texas and Intermountain West locales such as Salt Lake City.

Initially, the Great Recession was widely held to have reversed this pattern. As private sector growth retrenched, companies pulled out of newer offices in suburbia, sometimes consolidating in downtown office. The Bush-Obama stimulus also bailed out the two sectors — finance and government — that drive employment in most inner cities. Meanwhile, suburbs, with their collections of small companies that have little political heft and depend more on home construction, suffered greater drops in occupancies.

This urban tilt was, until recently, reinforced by political trends. After the 2008 election urban interests had secured a degree of political power unprecedented in recent history. The White House was occupied by a confirmed urbanite who found suburbs “boring” and had little connection with small town residents. The president stocked his EPA, Housing, Transportation and Education bureaucracies with pro-urban advocates who shared his vision to re-densify a country that has been steadily dispersing for half a century.

At the start of the Obama presidency virtually every critical committee post in the House was controlled by urban Democrats led by Speaker Nancy Pelosi — such old lions as Henry Waxman, Barney Frank and Charles Rangel. In concert with an urban-focused White House, they constructed a stimulus tilted toward key urban interests: public employees, large universities, mass transit and high-speed rail systems.

Now the cities’ political ascendency has come to an end. Suburban and small town voters, who represented a large majority of the electorate, shifted heavily the November toward the GOP. Unlike the city-focused old Congress, the new GOP dominated House’s primary loyalty is to the metropolitan periphery as well as smaller cities and towns.

This shift will affect big cities across the country. Urban land speculators counting on a national high-speed rail speed and expanded rail transit networks to boost central cores now face a Congress more concerned with roads than ultra-expensive new trains. You can also forget the hundreds of millions ascribed for “smart growth” plans, which, in essence, seek to direct development and housing towards high-density urban areas.

Even more serious for cities will be the fiscal fallout from the new order in Washington. Pushed by the Tea Party base, the GOP-led Congress will unlikely provide bailouts to fiscally challenged states and cities. This will hit those big cities — New York, Los Angeles, San Francisco and Chicago, – located in heavily indebted states — New York, California and, arguably the worst of the pack, Illinois — the hardest.

There is widespread concern, bordering on panic, about how potential cutbacks in state spending could further savage already strapped city budgets. In California, for example, Governor Jerry Brown’s proposed scaling back of state redevelopment funds was described in the Los Angeles Downtown News as a “budget bomb” for the city’s widely hyped but already tottering downtown renaissance.

Yet these challenges also present an opportunity for cities. As one prominent urban booster, Brookings’ Chris Leinberger, has pointed out in a recent radio interview (KPCC-FM-NPR), many of the nation’s cities no longer require the assistance deemed necessary back in the ’60s and ’70s. As they have developed somewhat stronger downtown cores, lowered crime rates and reduced “white flight,” the stronger urban cores are better positioned now, though perhaps less so than the boosters believe, to succeed on a market-oriented basis.

Even setbacks, like the largely failed condo boom, can turn into an advantage. No longer commanding high prices from the never-quite-materialized hordes of affluent “empty nesters,” the new units could provide a stock of lower-cost housing for the younger, educated and childless demographic attracted to urban core. Although most millennials consider suburbs their ultimate destination, a sizable number, roughly one in five, rank an urban center as their “ideal” location.

Cities need to break their reliance on outside help from a country that is, for the most part, not dense or urban. Future urban progress cannot rely on Washington’s largesse or diktats. Instead cities need to focus on how to create a greater competitive advantage in the demographic and employment marketplace. Rather than obsessing over government-driven employment, they have to create conditions that will lead to job creation in the private sector, particularly from the oft-neglected and usually politically impotent small business sector. These include such things as relaxing some regulations, including taxes on home-based businesses, incubator centers and more consistent standards on building construction.

City governments will need to shift their priorities away from ephemera and concentrate on such basics as improving schools, promoting entrepreneurial growth and nurturing sustainable middle class neighborhoods. The current shift in political power away from cities may be painful at first, but it could prove the elixir that will turn the urban renaissance fantasy into something closer to reality.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo by asterix611

January 20, 2011
Rise of the Hans

When Chinese President Hu Jintao comes to Washington this week, there aren’t likely to be many surprises: Hu and Barack Obama will probably keep their conversation to a fairly regulated script, focusing on trade and North Korea and offering the expected viewpoints on both. But seen from a different angle, everything in that conversation could be predicted, not from current events but from longstanding tribal patterns.

With China’s new prominence in global affairs, the Han race, which constitutes 90 percent of the Chinese population, is suddenly the most dominant cohesive ethnic group in the world — and it is seeking to remain that way through strategic alliances, aggressive trade policy, and attacks on racial minorities within the country’s boundaries. The less tribally cohesive, more fragmented West is, meanwhile, losing out.

Almost 20 years ago, I wrote a book called Tribes that sought to trace the role of ethnicity, race, and religion in economic and geopolitical affairs. At the time, there was some skepticism about the continuing influence of ethnicity; some considered the work, frankly, regressive and racist. Now, however, my thesis from 1992 has really come to fruition. We are living in the age of tribes — and China is just the start.

Such primitive racial instincts were supposed to be long ago passé: We’re supposed to be living in Thomas Friedman’s “flat” world or Kenichi Ohmae’s “borderless world.” By now, supposedly, everyone is increasingly interconnected and undifferentiated. Affairs should be managed neatly by deracinated professionals, working on their iPads from Brussels, Washington, or any of the other “global” capitals.

But most people do not really see themselves as members of a large multinational unit, global citizens, or “mass consumers.” Instead the drivers of history remain the essentials: the desire to feed one’s family, support the health of the tribe, and shape the immediate community. The particularistic continues to trump the universalistic.

This has only become more evident as our world becomes more multipolar. During the 19th and much of the 20th century, the world was dominated by a European capitalist mindset that glossed over many of the ethnic and racial differences simmering under the surface in the regions under its rule. Particular groups, including Chinese, Muslims, or Hindu Indians, might have harbored a sense of unique identity but, for the most part, either melded into the Euro-American mold, or, after the Russian Revolution of 1917, into the alternative Soviet one.

Today this has changed dramatically, as once suppressed racial and ethnic groups express their power on a global level. The rise of Chinese national identity, increasingly stripped of its socialist clothing, must be seen as the driving force behind the new tribalism. The country’s re-emergence as a great world power expresses the cultural ascendency not so much of Marxism or Maoism but of the Han race, which in only a few decades could control the world’s largest economy.

This represents a major shift in the identity of the Chinese tribe, a combination of political and economic power with a very homogeneous worldview. The best way to explain China’s economic and foreign policy is most accurately seen as a tribal expression of what Friedrich Nietzsche called a “will to power.” Essentially, the Han has become a tribal superpower that treats other groups — from China’s non-Han minority to much of the rest of the world — as a vast semi-colonial periphery. And with its growing economic and military might, Han China may soon be able to impose its will on some of these “lesser” cultures, should it desire.

China may be setting the underlying tone of our new world, but many other groups have responded in similarly tribal fashion. Like China, Russia has abandoned internationalist communism for a kind of Leninist state-capitalism with racial overtones, as evident both in the increasingly rough treatments of darker-skinned ethnic minorities such as Chechens and an aggressive ethnic Russian retro-imperialism — once disguised in socialist trappings — toward “near abroad” countries like Georgia, Armenia, Ukraine, and Belarus.

The state-sponsored restoration of everything from the Orthodox Church to Stalin — as well as the consolidation of state ownership over the lucrative energy sector — reflects the deeply nationalist core of the modern Russian state, which, for historical, geographical, and cultural reasons, has, with few exceptions, always bent toward authoritarianism. The end of the Soviet Union, it turns out, did not usher in a wider embrace of universal capitalism so much as engender various forms of ethnicity-based irredentism and, in Russia itself, a renewed Slavic nationalism.

As they have modernized and globalized, other races — Persians, Arabs, Brazilians, for just a few examples — have turned out to be far less cosmopolitan and more tribal. These nationalisms, or tribalisms vary widely. Some, like China and Russia, are specifically racial in character. Others, such as Brazil, are remarkably multi-racial. In some cases historic resentments are at the base. But all are less interested in adopting globalized norms of free markets or capitalism than using state power (through sovereign wealth funds and state-controlled corporations) to increase their influence and wealth.

The new tribalism is also increasingly evident in Europe. Just a few years ago Europhiles like French eminence grise Jacques Attali or left-wing author Jeremy Rifkin could project a utopian future European Union that would stand both as a global role model and one of the world’s great powers. Today, Rifkin’s ideal of a universalistic “European dream” is collapsing — a process accelerated by the financial crisis — as the continent is torn apart by deep-seated historical and cultural rifts.

Europe today can best be seen as divided between three cultural tribes: Nordic-Germanic, Latin, and Slavonic. In the north, there is a vast region of prosperity, a zone of Nordic dynamism. Characterized by economies based on specialized exports, a still powerful Protestant ethic, and a culture that embraces authority, these countries — including Scandinavia, the Netherlands, Germany, and, arguably, the Baltic states — are becoming ever more aware of the cultural, fiscal, and attitudinal gulf between them and the southern countries.

At the same time, the attempt to build a new European identity fused with immigrants appears to be failing. As Chancellor Angela Merkel noted, Germany has failed at “multi-culturalism.” Such sentiments may be reviled by the media, academics, and even business leaders in Northern Europe, but they are clearly popular at the grassroots. Once considered paragons of liberalism, countries such as Denmark and the Netherlands have incubated potent anti-immigration movements.

In a world dominated increasingly by Asia, northern Europe cannot be anything more than a peripheral global power, which may explain its new introversion. Instead these resilient cultures more accurately represent a revival of the old Hanseatic League, a network of opportunistic and prosperous trading states that ringed the North and Baltic seas during the 13th century. This new league increasingly battles over issues of trade and fiscal policy, often with ill-disguised contempt, with the southern European countries I call “the Olive Republics”: a region typified by dire straits, with rapidly aging populations, enormous budget deficits, and declining industrial might. Southern Europe now constitutes a zone of lassitude that extends from Portugal and Spain through the south of France, Italy, the former Yugoslavia, Greece, and Bulgaria.

The last European tribe includes the Slavic countries, centered by Russia but extending to parts of the Balkans as well, places like Ukraine, Belarus, Serbia, and Moldova that historically have looked east as well as west and are currently defined by shrinking populations and weak democratic institutions. A historic pattern of Russian domination is evident here, based in large part on a revived Slavic identity that embraces similarities in religion, culture, history, and language with countries living under Russia’s shield. In this sense the czars are back, not a great development for the rest of the world or for the fading chimera of a “common European home.”

What does this resurgence of tribalism mean to the foreign policy community? Clearly more attention needs to be played to such issues as cultural vibrancy, birthrates, and economic “animal spirits.” In some sense, we need to return to the perspectives of ancient writers like Herodotus and Ibn Khaldun, who attributed the rise and fall of nations to the vitality of what the latter called “group feeling.”

Tribalism will also threaten the efficacy of international organizations, which tend to assume common interests between groups. Instead we have to think of future international cooperation in more traditional terms, balancing distinct sets of tribal interest. As tribes continue to pursue their own interests ever more zealously, the idealistic rhetoric of multinational organizations will become ever more risible. The way China and other developing countries snarled up the Copenhagen climate conference reflects this shift.

Similarly, the problems with controlling trade to Iran have to do with long-standing economic relationships that are closely linked to cultural ties. Sanctions imposed from the West cannot compete with far more long-standing trade relations between Iran and places like Dubai. In the future, the best hope may lie in more temporary, ad hoc alliances based on the self-interest of individual tribes, such as how the U.S. and Russia may cooperate in space exploration as a means to preserve their hegemony in that field against newcomers such as China.

In essence, we need to shift from seeking labored, politically correct commonalities among cultures and work more on learning to reconcile and co-exist with people who always, inevitably, will remain strangers. This means, for example, throwing out the idea that any international model — say, the Anglo-American version — can be imposed or grafted onto other cultures.

“What about us?” Anglo-Americans may ask. In a globalized world that speaks and writes in English, the Anglosphere retains some natural advantages. This is where the most elite colleges and universities are located, and where the top financial firms are concentrated. Equally important, the Anglosphere also controls much of what the developing countries will most need in the future — food — through the unsurpassed fecundity of the United States, Canada, Australia, and New Zealand.

Demographics and a unique ability to absorb a wide range of immigrants make the Anglosphere economically and demographically vibrant — a point often missed by political scientists like the late Samuel Huntington and some elements on the political right. By 2050, the Anglosphere will be home to upwards of 550 million people, the largest population grouping outside China and India. English-speakers may not straddle the world like the 19th century empire-makers, but they are likely to remain first among equals well into the current century.

Ultimately, this will depend on how the English-speaking world evolves and learns to embrace its multiracial population without losing its sense of a common identity. Ideally, the Anglosphere can offer an alternative that embraces not merely a language but a set of historically achieved values such as democracy and freedom of speech, religion, and markets. Already many of the English-speaking world’s exemplary writers, artists, industrialists, and entrepreneurs hail from a vast and ever expanding array of backgrounds. It is in the melding of many into one dynamic culture that the Anglosphere may retain a powerful influence over our emerging world of tribes.

This piece originally appeared in Foreign Policy.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo Peter Fuchs

January 17, 2011