Category: Economics

Demographics and Commodities Crash Slowing Growth of Poorer Countries

Changing demographics and the commodities crash have slowed down the development of poorer countries.

Perhaps it all started with a turn in China’s demographics. Demand growth for commodities has declined sharply from recent years and has resulted in a crash of global prices. Copper is down 54% from its post 2008 peak and down 25% this year alone. Crude oil is down 67% and 39% in the same time spans. In addition to softer demand, prices were negatively impacted by jumps in supply, most notably from shale energy producers in the United States.

Impact of the 2011-15 Commodities Crash

If this massive price correction tells us anything, it is that the world is looking more vertical again. Aspiring economic powers of two or five years ago are grappling with the recessionary effects of lower prices for oil, natural gas, copper, iron ore and nearly every other commodity. If, per Warren Buffett’s impeccable quip, “you don’t know who is swimming naked until the tide goes out”, the commodities tide has gone out of the emerging markets boom and many were haplessly exposed in the raw.

Swimming naked in this context means an economy that was overly dependent on one or two drivers of growth. In the case of Russia, it was too dependent on energy. Brazil, too dependent on copper, iron ore and other commodities. And in both cases, not enough effort was made to diversify the economy and to implement needed reforms during the good times. The curse of cyclical wealth is that in good times, there seems to be no compelling reason for reforms. Why tinker with something that appears to be working? And in bad times, it is more difficult to implement those same reforms. Why create even more uncertainty in a time of uncertainty?

(click table to enlarge)

Leo Abruzzese of the Economist Intelligence Unit writes that “in 2016 rich countries will account for their largest share of global growth in this decade.” The EIU estimates that the eight largest rich economies will contribute 43% of global growth, while the eight largest emerging markets contribute 34%. These are respectively the highest and lowest shares in several years and they represent a big reversal from 2013 when the rich eight contributed 31% of global growth and the emerging eight as much as 47%. See chart in this article.

Among the flag bearers of emerging markets, Russia has suffered a crisis and a recession caused by the decline of energy prices and some foreign sanctions imposed during the Ukraine conflict. As shown in the table, Russia’s compound average real GDP growth has slowed from 6.1% in 2001-05, to 3.5% in 2006-10 and to 1.4% in 2011-15. The more recent two five-year periods both include a crash in the price of oil from over $100 to less than $40. The economy is expected to contract 2.7% this year. Russia’s problems are partly due to demographics because its population is shrinking and its dependency ratio is rising. But other reasons for the slowdown include a dearth of innovation and a business climate which discourages inward investment.

China’s impressive real GDP growth printed at or near double digit annual rates for the entire decade 2002-11 but this growth has tapered starting in 2012 to an estimated 7.1% in 2015 and probably lower next year. As discussed here, China managed to capture a very large demographic dividend thanks to sound policymaking that encouraged trade and investment. But its dependency ratio has now bottomed and started to climb. In response, China can avoid a prolonged decline by adopting reforms that encourage innovation and investment.

Brazil is in the midst of a contraction made worse by corruption scandals at leading companies such as Petrobras and BTG Pactual. The demographic picture is mixed but there will be little to cheer about before reforms are enacted to reduce corruption and encourage investment. The alternative is to wait for the next commodity bull market but this could take years to materialize.

India looks best among the BRIC countries in part due to its more favorable demographics and to the promise of accelerated reforms under prime minister Modi. We discussed India’s demographics and the prospects for investments and legislative reforms in previous posts here and here.

Outside of the BRIC countries, countries with favorable demographics could over time pick up the torch and lead a revival of emerging markets. These include Pakistan, Indonesia, the Philippines, Nigeria and other countries of sub-Saharan Africa. Because of its booming working-age population, Africa holds the most promise but also presents the biggest challenge. See previous posts on Africa discussing policymaking, education, demographics, trade and infrastructure.

“Science is the Cause”

Meanwhile, the immediate result of the emerging market slowdown is that we are now at some distance from the optimistic visions put forth by, among others, Thomas Friedman in The World is Flat: A Brief History of the Twenty-First Century (2007) and Fareed Zakaria in The Post-American World and the Rise of the Rest (2009), books that trumpeted the rise of emerging markets economies in the 21st century. Zakaria summed it up in a supporting Newsweek article:

It is an accident of history that for the last several centuries, the richest countries in the world have all been very small in terms of population. Denmark has 5.5 million people, the Netherlands has 16.6 million. The United States is the biggest of the bunch and has dominated the advanced industrial world. But the real giants—China, India, Brazil—have been sleeping, unable or unwilling to join the world of functioning economies. Now they are on the move and naturally, given their size, they will have a large footprint on the map of the future.

This quote is full of peremptory élan but it deserves to be examined in some detail because in my view, it reveals the main error in the author’s thesis and blurs the corrective factors that now require our attention. After all, how robust was this vision of the “Post-American world” if a very predictable cyclical downturn in commodity prices is sufficient to put it on hold and defer it for years? Contrast Zakaria’s thought with the following excerpt from Winston Churchill’s speech Fifty Years Hence in 1931:

When we look back beyond a hundred years over the long trails of history, we see immediately why the age we live in differs from all other ages in human annals. Mankind has sometimes travelled forwards and sometimes backwards, or has stood still even for hundreds of years. It remained stationary in India and in China for thousands of years. What is it that has produced this new prodigious speed of man? Science is the cause. Her once feeble vanguards, often trampled down, often perishing in isolation, have now become a vast organized united class-conscious army marching forward upon all the fronts towards objectives none may measure or define. It is a proud, ambitious army which cares nothing for all the laws that men have made; nothing for their most timehonoured customs, or most dearly cherished beliefs, or deepest instincts. It is this power called Science which has laid hold of us, conscripted us into its regiments and batteries, set us to work upon its highways and in its arsenals; rewarded us for our services, healed us when we were wounded, trained us when we were young, pensioned us when we were worn out. None of the generations of men before the last two or three were ever gripped for good or ill and handled like this.

Zakaria emphasized demographics while Churchill focused on the importance of science and innovation. Both are key components of growth. Some European countries such as Denmark and the Netherlands may not weigh much demographically but their contributions to the advancement of science and philosophy easily exceed those emanating from many populous nations.

As often discussed on this page, demographics are an important driver of the economy, but they are only one of several important drivers, the others being innovation, productivity, health, governance and institutional strength. Demography is not destiny but it is a part of destiny. It cannot alone deliver sustainable economic growth and it can at times impact the economy adversely. In the present case, a turn in demographics is one of the reasons for China’s slowdown and the resulting fall in commodity prices.

It is true that China, India and to a lesser extent Brazil are demographic giants. But it does not follow that their economic progress was unnaturally held back for centuries, while diminutive populations raced ahead due to a temporary fluke of history. Those smaller populations had innovation and a conducive context going for them. In order to be sustainable beyond one economic cycle, or even one economic super cycle, strong growth requires innovation, reliable institutions, good governance, political plurality and low corruption.

It is still early in the century, but for now, the rise of the rest seems to have stalled. The questions going forward are: is this merely a pause in the development of poorer nations or is it the beginning of an unfortunate reversal? What can be done to build upon the past boom and to put these nations and others back on the growth trajectory?

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master’s in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Shanghai photo by flickr user Sprengben.

February 4, 2016
Chicago Is Winning the Battle for the Executive Headquarters

The corporate headquarters used to be the primary measure of a city’s economic clout. Saskia Sassen, while not ignoring headquarters, documented how in the age of globalization, the resurgence of the global city was driven by demand for financial and producer services, not more and bigger HQs. As she pointed out in her seminal book The Global City, “Major cities such as London, New York, and Chicago have been losing top ranked headquarters for at least three decades.” Yet despite this they were coming back strong.

Back in 2008, I started observing a shift in the marketplace in which corporate HQs were relocating back to the city. But this wasn’t a traditional monolithic HQ, but rather a reconstituted, smaller version consisting of only the most senior people that I call the “executive headquarters.”

Crain’s Chicago Business has a major feature this week investigating the executive headquarters trend as it is playing out there. They point out that these HQs make for great headlines, but they don’t necessarily result in that many jobs.

ADM is Exhibit A in the rise of a new type of corporate headquarters, one that arrives from afar but packs light. These headquarters represent the pinnacle of the corporate pyramid, snapped off and relocated, free of jobs tied to operations and often midlevel HQ functions such as payroll, human resources or purchasing. To be sure, migrating headquarters offer benefits to the city: They boost demand for business services, their executives join the philanthropic scene and, of course, they confer bragging rights. But in terms of jobs, the farther a company travels to set up shop in Chicago, the fewer people come with it.

“The notion of the corporate headquarters in the ‘Mad Men’ world when there were hundreds or thousands of people in a building with the company logo . . . those days are gone,” says David Collis, a professor at Harvard Business School who studies corporate headquarters.

Click through to read the whole thing, which features me and my work on the topic. This is an important trend to grapple with.

The bad news, which the Crain’s piece highlights, is that the headquarters ain’t what it used to be. On the other hand, Chicago is winning the battle for them. These smaller executive headquarters, particularly for major global businesses, benefit from being in a global city. Chicago has lured a number of these from out of town. In line with Sassen’s findings that the “deep economic history of a place” matters, note that we see a lot of agro-industrial firms choosing Chicago: ADM, Con Agra, Mead Johnson Nutrionals, Oscar Mayer. This industry space is where Chicago has a major advantage over New York and other coastal cities.

A trend I see playing out, and which I am currently researching in more detail, is the bifurcation of HQ attraction. For executive headquarters of global firms, and for companies that are looking for an urban location, Chicago is reasserting its dominance as the interior business capital. But for those who prefer a suburban environment, or which maintain a mass employment HQ, the Sunbelt remains strong, especially Dallas, where Toyota is a building its North American campus. Dallas replicates many of Chicago’s non-urban advantages at lower cost and with a more suburban feel: central location and time zone, a major airport, a diverse economy, and scale. Increasingly it looks like Chicago is the urban interior capital, Dallas the suburban interior one. Stay tuned for more on this in the future.

Aaron M. Renn is a senior fellow at the Manhattan Institute and a Contributing Editor at City Journal. He writes at The Urbanophile, where this piece originally appeared.

Chicago photo by Bigstock.

February 3, 2016
Serfs Up with California’s New Feudalism

Is California the most conservative state?

Now that I have your attention, just how would California qualify as a beacon of conservatism? It depends how you define the term.

Since the rise of Ronald Reagan, most conservatives have defined themselves by pledging loyalty to market capitalism, supporting national defense and defending sometimes vague “traditional” social values. Yet in the Middle Ages, and throughout much of Europe, conservatism meant something very different: a focus primarily on maintaining comfortable places for the gentry, built around a strong commitment to hierarchy, authority and a singular moral order.

Until recently, modern California has not embraced this static form of conservatism. The biggest difference between a Pat Brown or a Reagan was not their goals – greater upward mobility and technical progress – but how they might be best advanced, whether through the state, the private sector or something in-between. Under both leaders, California evolved into a remarkable geography of opportunity.

In contrast, California’s new conservatism, often misleadingly called progressivism, seeks to prevent change by discouraging everything – from the construction of new job-generating infrastructure to virtually any kind of family-friendly housing. The resulting ill-effects on the state’s enormous population of poor and near-poor – roughly-one third of households – have been profound, although widely celebrated by the state’s gentry class.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photograph: Great Seal of the State of California by Zscout370 at en.wikipedia [CC BY-SA 3.0],from Wikimedia Commons

February 2, 2016
The Politics Of The Next Recession: How A Bust Could Impact The 2016 Elections

In this hyper-political age, perceptions about virtually everything from the weather to the Academy Awards are shaped by ideology. No surprise then that views on the economy and its trajectory also divide to a certain extent along partisan lines.

How the public perceives the economy will have a major impact on this year’s elections. That most are already discouraged cannot be denied; the negative sentiment has propelled the rise of such seemingly marginal political figures as Donald Trump and Bernie Sanders. But will the economy prove a bother to the Democrats?

A lot depends on where you live and what you do. Much of the country is not doing so well; despite a strong two-year run in job creation, some 93 percent of U.S. counties still have not gained back all the jobs that they lost in the Great Recession, according to the National Association of Counties.

Yet many liberals believe the economy is shipshape. Paul Krugman, the progressive economist, hails the “Obama boom,” citing rising employment, some slight income gains and, at least until recently, a soaring stock market.

Krugman and others point to California, the epitome of true-blue virtues, as having what one progressive journalist calls a simply “swell” economy. Rarely mentioned is the fact that, for the past two decades, the state’s economy has more often underperformed national averages.

More serious still, the same state that boasts Silicon Valley also suffers the highest poverty rate in the nation. Overall nearly a quarter of Californians live in poverty, the highest percentage of any state, including Mississippi. According to a recent United Way study, close to one in three is barely able to pay their bills.

A slowing economy and weak stock market, in contrast, does offer some solace to Republicans, who clearly see a political opportunity. Even at its best, this has been a slow growth recovery and while the official unemployment rate has improved sharply, labor participation rates remain depressed by historical standards. Millions of young people remain in their parent’s homes as opposed to engaging the economy, buying homes, and getting onto adulthood.

The End Of The Asset Boom

America may not be in as bad shape as Republicans and conservatives like to insist. Certainly compared to Europe or Japan, we’re in great shape. While some doubt weakness in China really poses a danger to the U.S. – exports account for only 13% of U.S. GDP, after all, and China is not one of the largest markets for U.S. goods — David Stockman, among others, argues that China’s slowdown is due to a dangerous phenomenon that is present in the U.S. as well: a disastrous level of debt. Some Democratic economists like Larry Summers, as well as economic gurus such as Mohammed el-Erian, warn that we should at least prepare for the possibility of recession.

Certainly the China crisis threatens the trajectory of certain blue cities. Money from China and other parts of Asia has helped propel real estate markets in places like coastal California, New York and San Francisco. China has also been a major source of tourists and consumers for high-end electronic products that are at least designed and marketed here.

Similarly California’s tech boom also seems to have reached its apogee. The fact that Silicon Valley types have gotten rich appears to have done little for the average American, and done very little to improve productivity. With the market looking on with greater skepticism, several major players — Groupon, Yahoo, Twitter, for example — seem vulnerable. If a full scale bust is not imminent, a downturn in valuations, and likely employment, seems inevitable.

A slowdown in the Valley could place the blue bastions in an uncomfortable situation, exacerbating splits already evident in the Clinton-Sanders clash. The mega-profits enjoyed by sectors close to the Democrats, notably Silicon Valley, media and a large part of finance, have encouraged progressives to advance an ever more expansive, and expensive, liberal agenda. With billionaires stalking the streets of San Francisco, who could possible oppose a big boost in the minimum wage, family leave, massive transit projects and the provision of subsidized housing.

Progressives may detest the investor class that has gotten rich in the “Obama boom,” but they remain deeply dependent on them to finance their green and social agendas. California’s coffers have been filled in recent years largely by the huge rises in income and capital gains among the investor class, who are well represented in the Golden State. Similarly New York Mayor Bill de Blasio’s aggressive agenda for new housing and expansion of social programs depends largely on the continued looting of the economy by Wall Street.

The developing decline in asset values threatens the progressive agenda, and could set up a major battle between key progressive constituencies — rich liberals and those dependent on public sector spending. The fundamental incompatibility of ever-expanding pension liabilities and the provision of basic public services is becoming painfully clear in places like Chicago and Detroit, and smaller cities like San Bernardino and Stockton. More of blue America could join them if asset values continue to drop.

A nascent recession would almost certainly spark something of a civil war between the traditional left constituencies and the kind of business progressives one finds in Silicon Valley, Wall Street and the media industry. A first stage of this conflict is already emerging in California, where former San Jose Mayor Chuck Reed has been seeking to rein in the state’s unfunded $350 billion pension liability. Silicon Valley largely has backed Reed’s past efforts, which has elicited a fierce blow-back by the public employee unions and their political allies.

Blue And Red, Reinforced

A recession would change many things, but not enough to challenge Democratic dominance in California, New York and other parts of the “blue wall.” Unemployment could double and Hillary Clinton — perhaps even Bernie Sanders — could win these places in a walk. After all, Jerry Brown was elected and then re-elected when California’s economy was still struggling to recover. Theoretically, the cost of energy, the lack of water for farms, and a decaying infrastructure should provide an opening for Republicans, but as middle income families continue to move elsewhere, the shift to a single, childless, minority and immigrant demographic makes any successful GOP makeover all but impossible.

Instead of pushing them to the GOP, a recession could further radicalize the Democrats but not upset their control of dark blue states. But the deepening decline in the real tangible economy — energy, manufacturing, agriculture — could prove a boon to the GOP in much of the rest of the country.

Before the decline in oil prices many areas in the middle of the country enjoyed a gusher in energy jobs, providing high wage employment (roughly $100,000 annually, exceeding compensation for information, professional services, or manufacturing). Due largely to energy, states such as Texas, Oklahoma, North Dakota have enjoyed consistently the highest jobs growth since 2007, and were among the first states to gain back all the jobs lost in the recession.

Of course, tough times in red states like Texas, Oklahoma, Louisiana and North Dakota will only pad Republican gains. But there are other, contestable heartland states — Ohio and Pennsylvania, in particular — that also benefited from the expansion of fracking, which created whole new markets for manufactured products like pipes and compressors. Similarly, the administration’s directive to crack down on coal plants could be problematic for Iowa, Kansas, Ohio, Illinois, Minnesota and Indiana, which rank among those most reliant on coal for electricity. Not surprisingly much of the oppositionto the EPA’s decrees come from heartland states.

Right now virtually every Great Lakes state, except Illinois, enjoys unemployment rates below the national average and several, led by the Dakotas, Minnesota, Nebraska and Iowa, boast among the lowest in the nation.

But with energy, agriculture and manufacturing slowing down, the prospects for the middle of the country have turned increasingly sour. A manufacturing decline might not matter much to New York, where the sector accounts for barely 5 percent of state domestic product but industry accounts for 30 percent of the economy in Indiana, 19 percent in Michigan. If the current trends hold, the case for the “Obama boom” in this vast swath of America may be further weakened.

To the problems of regulation and market turbulence, manufacturing economies are also threatened by the rising value of the dollar, which threatens the Rust Belt’s prime exports and bolsters competitors, both in Europe and Asia. After all, manufactured goods are the leading export in much of the upper Midwest while food exports, also hard-hit by the hard dollar, dominate many Great Plains economies. In 2012, a recovering Rust Belt was critical to President Obama’s victory; a weakened industrial economy could make Republicans more competitive in the region, particularly if they nominate an electable candidate.

Will A Recession Create A New Politics?

Until the stock swoon, few commentators focused on the political implications of what very well may be an emerging recession. After all, if coal miners in West Virginia lose their livelihoods, it hardly effects the lifestyle of Capitol bandits a couple of hours away, and eliminating oil jobs in Bakersfield doesn’t cramp the style of tech moguls who don’t ever get their hands dirty. But with the stock market in sharp decline, the affluent may soon be feeling some of the angst felt by many middle and working class people during the “Obama boom.”

Indeed because President Obama’s policies are so identified with progressivism, a recession now could undermine support for his bank-friendly, super-green policies. The chimera of green jobs never had much reality, but low energy prices inevitably weaken the renewable sector. In times of asset inflation, losses on the farm, the factory, the mine or the drilling platform can be dismissed as part of “disruption” and progress, but what happens if other linchpins of the economy, notably tech and finance, begin to wobble as well?

If nothing else, a weaker economy will accelerate the increasingly populist tone of the Democratic Party, as epitomized by Senator Bernie Sanders’ remarkable rise. The kind of neo-liberalism epitomized by the Clintons rested on financial support from Wall Street, Silicon Valley and media companies. This support has become something of a liability for the former Secretary of State.

But the most important political impact of a slowdown or new recession, will be in the heartland, where elections are often won. Yet logic seems on a holiday in a Republican Party which seems to feed on resentment but produce little in the way of practical solutions. Indeed front-runners like Donald Trump and Ted Cruz thrive not by addressing economic growth but focusing instead on anxieties relating to immigration, Islamic terrorism and cultural change. Amidst an incipient recession, or at least a serious slowdown, after a weak recovery, Republicans should be able to make some gains, but to do so they have to give some glimmer of having the chops to turn the economy around.

Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

January 30, 2016

Cleveland Renaissance Fair

So much talk of the Cleveland comeback with our downtown building boom and Republican National Convention-fueled makeover makes it difficult not to think about our mid-1990s civic renaissance. In 1995, The New York Times headline proclaimed ” ‘Mistake by the Lake’ Wakes Up, Roaring” as downtown’s stadiums and lakefront development created a “new face and new style of a city that for a long time had little panache.”

But it wasn’t just the media who became enchanted with our freshly minted charms — even the scholars were feeling it. The academics, however, had a Lake Erie-sized caveat. There was a divide in the region’s comeback, noted the authors of the 1997 study “The Rise and Fall and Rise of Cleveland,” with areas separated by characteristics of “capital investment and disinvestment, industrialization and deindustrialization, suburbanization and ghettoization, white flight and a black underclass, the growth of services, and a [high-skill and low-skill] dual economy.”

Prophetic then, those words serve as a warning now. The paradox of Cleveland’s comeback, if not an urban American comeback, is that the more a city returns, the greater the number who get left behind.

Rob English splits his time between Baltimore and Cleveland. He has been doing so for nearly three years.

A former Army infantryman, he serves as supervising organizer for the Greater Cleveland Congregations, a network of local faith and community-based organizations working for social justice. His experience in Baltimore since 1997 gives him a different perspective on his work in Cleveland today. “You have to meet people where they’re at, listen to them, and find ways to act in their mutual interest,” he says.

English marched with the Cleveland group in late May after the Michael Brelo trial verdict to demand comprehensive criminal justice reform. As the demonstrators from about 40 religious congregations walked arm-in-arm along downtown streets to City Hall and the Justice Center, it was peaceful — unlike what happened in Baltimore a month earlier. There, the death of 25-year-old Freddie Gray in police custody prompted violent social unrest.

“Baltimore is about seven to 10 years ahead of Cleveland,” says English.

Odd as it sounds, what English means is that Baltimore’s economic resurgence has been longer in the making — and that may be a good thing for Cleveland.

Baltimore’s signature project, the cleanup and rehabilitation of Baltimore’s Inner Harbor with its world-class aquarium and science center, began in the 1980s. Oriole Park at Camden Yards, an architectural model for Progressive Field, opened in 1992.

With the beautification came a change in the city’s demographics. Today, nearly 27 percent of Baltimore residents have college degrees, compared to 16 percent in Cleveland. Baltimore’s median income ($41,385) is $15,000 higher than here. Cleveland’s poverty rate sits at 35 percent, 12 percentage points more than Baltimore.

But the benefits in Charm City are not evenly distributed. White city residents earn nearly double that of black city residents. Baltimore also had the ninth worst wage disparity between high- and low-income workers in the nation, according to the Martin Prosperity Institute. So, while the physical redevelopment is apparent in the eyes of all Baltimoreans, the effect is uneven in their temperaments.

English, 46, recalls a talk he had with an African-American woman from East Baltimore several years back. She could see the Inner Harbor off in the distance from her neighborhood.

“Let me tell you about my anger,” she told him. “Every morning when I wake up and take the kids to the bus stop, every morning I look down and see the harbor, and every morning I get angrier.”

Her experience is more than an isolated one, says English. In Baltimore, people saw aspects of the city improve year after year. Yet so many weren’t a part of it. Eventually tensions built, and the Freddie Gray incident ignited it.

“Now, Cleveland is beginning a renaissance,” English says. “But there is room to come together so you’re not two cities.”

——–

Thomas P.M. Barnett’s book The Pentagon’s New Map is more than a decade old. But its message is no less relevant.

“Disconnectedness defines danger,” he argues.

For the expert geostrategist, the world is split between two types of geographies: the Core, where “globalization is thick with network connectivity, financial transactions, liberal media flows, and collective security,” and the Gap, or areas disconnected from globalization and defined by poverty, low education rates and “the chronic conflicts that incubate the next generation” of instability.

“We ignore the Gap’s existence at our own peril,” concludes Barnett.

It is a useful model in understanding what’s occurring in Northeast Ohio.

Consider that, according to a Brookings Institution study, Cleveland and Seattle led the nation with the biggest percentage increases in high-income households from 2012 to 2013. Yet, research from Rutgers University revealed Cleveland also has one of the largest increases in neighborhoods with concentrated poverty since 2000.

This division is further evident when mapping the concentration of Northeast Ohio residents with college degrees. Higher educated areas are centered in downtown, Ohio City, Tremont, Detroit Shoreway and AsiaTown, which have each seen double-digit percentage increases in residents with college degrees since 2000, as well as along the lakeshore, near University Circle and in various suburban and exurban clusters. Meanwhile less educated areas are grouped in the city of Cleveland outside the urban core and in the rural exurbs.

Simply, areas of Cleveland that are revitalizing are part of the globalizing Core. The isolate neighborhoods, or those experiencing higher levels of violence and poverty, comprise the Gap.

In fact, for a number of quality of life indicators, outcomes in various East Side neighborhoods are below that of developing nations. A recent PolitiFact article showed that infant mortality rates were worse in select East Cleveland neighborhoods than in North Korea, Uzbekistan, Zimbabwe and the Gaza Strip.

According to data by Case Western Reserve University, homicide rates for sections of the city are similarly comparable. In 2010, homicide rates in Ward 1, comprising parts of the southeast side, and Ward 9, which entails Glenville, are similar to Guatemala and El Salvador.

What’s happening here is not unlike cities such as Chicago, Baltimore, Miami and Brooklyn, New York, where the spatial patterns of having and not having mean poverty gets pushed together, not alleviated. When cities evolve as separate and unequal, they create a deepening sense of alienation and marginalization.

“The economic and social frustration could be expressed in more recourse to violence,” says Mark Joseph, director of the National Initiative on Mixed-Income Communities at Case Western Reserve University.

Revitalizing neighborhoods have more “eyes on the street,” says Joseph, who examined the effect in the Second City while at the University of Chicago. And more vigilant policing can “push gangs into more constrained areas of the city and into more conflict with each other.”

In the first nine months of 2015, for example, there was a 40 percent increase in gun homicides compared to 2014.

“As we are seeing in our city, innocent bystanders suffer the consequences as well as those directly targeted,” Joseph says.

In a span of a month, a 5-year-old, a 3-year-old and a 5-month-old were all victims of drive by shootings from gang violence that has boiled over in various East Side neighborhoods.

After the youngest, Aavielle Wakefield, was killed, Cleveland police chief Calvin Williams stood at the crime scene on East 143rd Street in Cleveland’s Mount Pleasant neighborhood. It was night. The street was lit by the television crews. With Mayor Frank Jackson by his side, the chief demurred about the senseless tit for tat, the need to catch the perpetrators.

Suddenly, his face went from firm to fragile. “To the family … it’s tough … it’s tough,” he said in tears. “This should not be happening to our city. And we got to do something about it.”

——–

“I have looked into the eyes of children soldiers overseas,” says English, who served a platoon leader stationed in Somalia. “I see the same look in Cleveland and Baltimore. That is what decades of disinvestment has created in our urban areas. It’s got to stop.”

Click to Enlarge

English was in Baltimore in April when the riots erupted about 20 miles away from the harbor. The city was on needles. English and a few co-workers received alerts about young people near Mondawmin Mall turning violent.

The message was to go where the rioting was occurring, with the intent to stem the unrest.

When English arrived, a CVS was being looted and burned. As a community organizer, English attempted to do what organizers do: connect to the disconnected. But he wasn’t succeeding.

“I looked at the young people in the eyes,” he recalls. “I lost my soul. I couldn’t connect with them.”

Anthony Body, a 29-year-old Glenville resident and member of the Cleveland Community Police Commission, sees similarities here.

“There is a sense of hopelessness,” he says.

Isolation fuels the cycle of disenfranchisement. Without exposure to positive outcomes, there can only be so much progress. Body says due to the lack of role models in his neighborhood people were influenced by the lifestyle of rappers, drug dealers and the garbage man.

“There is nothing wrong with being a garbage man,” he says. “But in order to choose Option B, you had to be exposed to Option B.”

The realities of his neighborhood have taken a personal toll. Body has lost at least one family member or friend to violence every year since 2006.

“All the trauma. The trauma of no job, the trauma of violence — the lack of family or social support — the schools,” he says, “it all drags on you when you try to better your life, so that when difficulty hits, you just go back to what you know.”

No doubt, the persistence of violence is not just a Cleveland problem, but a national one. Homicides are up sharply in Washington, D.C., Milwaukee, St. Louis and Baltimore.

On a mid-October trip to Ohio, FBI director James B. Comey wondered aloud: After years of declining violent crime in cities, why the uptick? “I’m not here announcing any big initiative or program,” Comey said, “but we have a lot of smart people who we brought on board after 9/11 who may be able to help look at the issue differently.”

Cheap heroin from Mexico and the turf battles to supply what has become a nationwide heroin epidemic was one likely scenario, he offered.

“What we’re in the midst of is a drug war,” says Hough resident and writer Mansfield Frazier, who likens today’s violence to the St. Valentine’s Day Massacre that left seven men dead in Prohibition-era Chicago.

For Khrystalynn Shefton, a housing development manager at the Famicos Foundation — a community development corporation in Glenville and Hough — this drug war is not just an urban problem, but an everyone problem. It’s limiting the potential for struggling neighborhoods to appreciate.

Shefton tells the story of a friend who lives off Rockefeller Park in a beautifully renovated home in Glenville. On a recent Sunday, she was enjoying tea in her sunroom. “A guy pulls up, straps up and does heroin in front of her house,” Shefton says. When he was done, the man left down Martin Luther King Jr. Boulevard to head toward Interstate 90 and back to the suburbs.

“The pain for me in this renaissance is that as a city we have not figured out that ‘I am my brother’s keeper,’ ” she says. “It’s all connected — the ills in the suburbs and the city.”

The roots of urban violence run deeper than the existence of a drug war. In September, the Cincinnati Enquirer investigated the Queen City’s rise in gun violence. What Cincinnati was witnessing ran counter to conventional wisdom that crime goes up in bad economic times and down in good times, offered Mayor John Cranley.

“This is the best economy we’ve had since the Great Recession and yet crime is up,” Cranley explained. “So it’s more likely to be linked to social and cultural than economic reasons.”

Of course, one could argue that the violence is linked to social and cultural issues stemming from economic reasons. Simply, the economy has changed rapidly since so many worked in the plants. Good economic times have been divorced from so many people, if not a generation of so many people.

The Georgetown Public Policy Institute found that four out of the five jobs lost since the Great Recession required a high school degree or less. “The shift in the workforce from less-educated to more-educated has been a slow and steady process,” notes the authors.

In the early 20th century, Cleveland was a magnet for European immigrants, Puerto Ricans and African-Americans because industry needed labor to produce economic growth. Manufacturing built our middle class. It enabled people to move up.

In 1990, for example, more than 50 percent of Cuyahoga County’s African-American residents lived in heavily segregated East Side city neighborhoods, while today that number is down to 30 percent.

That said, large-scale launchpad industries for formerly blue-collar communities are now nonexistent. Cleveland lost its old magnetism. But the children and grandchildren of the city’s factory-floored forefathers remain.

And they are idle. Thirty-eight percent of Cleveland’s males are not in the labor force. In black majority neighborhoods such as Union Miles, Central and Glenville, those numbers approach 50 percent.

When English first began canvassing Rust Belt cities, the Texas native was amazed at the number of black men standing on the corners. In Baltimore, he got to know many of them.

“We have always been on the corners,” English recalls one of them telling him. “The difference then is that we had lunch pails, and we were waiting for a ride to the steel mills.”

While English has been making that point for years, corporate and civic leadership in Baltimore are just now coming around to it, he says. “The unrest in Baltimore and the day-to-day violence in Cleveland — it’s a jobs issue.”

Body, a good neighbor ambassador supervisor with the Northeast Ohio Sewer District, echoes the sentiment. “People where I live just want opportunity,” he says. “They want to work. Every generation up to recently had [opportunities to work] handed down, somewhere in between it stopped being handed down.”

Body, who earned a business degree from Malone University while on a football scholarship, considers himself blessed. His parents and higher education taught him critical-thinking skills. He became better prepared for today’s economy. He found his place — and Glenville is a part of it.

“I’m still playing the dozens and breaking bread with my community,” he says. “I’m trying to express to folks there is another way.”

But too many of them can’t see it, he says. “The feeling in most folks is disappointment for not being able to join with it.”

——–

There is an understanding in geopolitics that everything local is global. What you see happening on the corner is tied together, whether that’s a vacant house and a skeletal factory or a condo development and state-of-the-art medical research facility.

It is correlated to Cleveland’s relationship with and relevance in the world. One set of aesthetics are birthed by severing from our economic past, and the other birthed from ties to our economic future.

In between these aesthetics are people.

Yes, a younger, more educated generation has found aspiration in Cleveland’s core. Yet to think Cleveland can come back by deepening the pattern of isolation versus prosperity is to ignore a basic tenant of modernization: With evolution comes progress — not just economically, but humanly.

Cleveland’s rebirth is in its infancy. The city is still alive in the shadows of all it has lost, making it possible for a consciousness to be reborn right.

Part of this entails learning from the lessons of Baltimore. There, like in Cleveland, the city’s economic transformation is largely spearheaded by the education and medical sectors centered around Johns Hopkins University and Johns Hopkins Hospital in East Baltimore.

Recently, in the face of Baltimore’s social unrest, the two institutions joined in an initiative called HopkinsLocal. The point is simple: Tackle social and health issues in Baltimore by engaging the city’s poorest residents and preparing the unprepared. By 2018, they plan to fill 40 percent of targeted positions by hiring from within the city’s most distressed communities. In all, it is one of the more robust buy local anchor institution policies in the nation.

Locally, programs to do something similar with anchor institutions have been developed, particularly the Evergreen Cooperatives. The worker-owned co-ops based in Cleveland’s East Side are contracted out to sell local goods and services to global institutions such as the Cleveland Clinic. While innovative, the efforts need scaling. Discussions are happening in Cleveland to do just that.

For English, the urgency couldn’t have come too soon.

“It’s a generational moment,” he says. “In the future, people will look back to now and ask, ‘How did we respond?’ “

This piece first appeared in Cleveland Magazine.

Richey Piiparinen is a Senior Research Associate who leads the Center for Population Dynamics at the Levin College of Urban Affairs at Cleveland State University. His work focuses on regional economic development and urban revitalization.

January 26, 2016

In Southern California, It Takes an Assortment of Villages

Among urban historians, Southern California has often had a poor reputation, perennially seen as “anti-cities” or “19 suburbs in search of a metropolis.” The great urban thinker Jane Jacobs wrote off our region as “a vast blind-eyed reservation.”

The Pavlovian response from many local planners, developers and politicians is to respond to this criticism by trying to repeal our own geography. Los Angeles’ leaders, for example, see themselves as creating the new sunbelt role model, built around huge investments Downtown and in an expensive, albeit underused, subway and light-rail network.

Yet the notion of turning Southern California into a dense, New York hybrid makes very little sense. Nor has it done much for the regional economy, certainly in Los Angeles. The City of Angels thrived during its period of development into a multipolar region; in the 21st century, as Downtown has gained a few thousand hipsters, the rest of the city has lagged economically while population and job growth – including in tech – has been more robust in the surrounding counties of Orange, Riverside and San Bernardino.

Building off Strength

Southern California, even before the advent of the freeways, developed along the lines of an “archipelago of villages.” Even Downtown Los Angeles, the one legitimate urban core in the region, lost its central relevance by the 1930s and, despite all its self-promotion, employs close to the smallest share – well short of 3 percent – of the regional workforce of any large region in the country.

In contrast, the two fastest-growing areas in Southern California – the Inland Empire and Orange County – are arguably the largest regions in the country without a real downtown. Rather than a negation of urbanity, as some suggest, these areas are nurturing an expansive archipelago of smaller hubs, each serving distinct geographies, populations, tastes and purposes, and constitute the building blocks for Southern California’s urban future.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

January 21, 2016

Why High Taxes Aren’t the Only Reason GE Left Connecticut

General Electric, unhappy with a recent corporate tax increase in Connecticut, has now announced that it is relocating to Boston’s south waterfront. Indeed Connecticut’s tax climate is bad, ranking 44th according to the Tax Foundation, but GE’s move points to much bigger problems in the state. I examine this in my new piece over at City Journal. Here’s an excerpt:

For decades, nearby New York City’s pain was Connecticut’s gain. New York was a grim, dangerous, failing city that almost went bankrupt in the 1970s. More than 100 Fortune 500 companies fled during that era, many heading to suburban New Jersey and Connecticut—including GE, which moved in 1974 from 570 Lexington Avenue to Fairfield, Connecticut. The same story played out in cities across America, with corporations fleeing dying downtowns for the safety of the suburban office campus.

Today, cities are back. The policing revolution—helped by the waning of the crack epidemic—made cities safe again. Core public services were slowly restored, parks were rebuilt, and transit systems were cleaned up and refurbished. Investment started returning. The structure of the economy changed, too. Starting in the 1990s, technology radically transformed the business world and is now a major industry in its own right. The financial industry was deregulated. Globalization drove demand for new types of business services, reinforcing the need to stay on top of a constantly shifting landscape. People with advanced, specialized knowledge are the ones who help companies innovate now. These employees work in highly interactive ways that benefit from clustering together—disproportionately in urban areas like New York, Chicago, and Boston.

Click through to read the whole thing.

Aaron M. Renn is a senior fellow at the Manhattan Institute and a Contributing Editor at City Journal. He writes at The Urbanophile, where this piece originally appeared.

Photo: The former General Electric/Remington facility in Bridgeport, CT. The buildings have been demolished in recent years.

January 20, 2016

Is California’s Economy Swell?

Every now and then, something happens to cause California’s comfortable establishment to celebrate the state’s economy. Recent budget surpluses and jobs data have provided several opportunities, never mind that these are hardly summary statistics. They don’t tell the complete story.

The celebrants conveniently ignore California’s nation-leading poverty, huge inequality, persistent negative domestic migration, and the fact that with about 12 percent of the nation’s population, California is home to about 30 percent of the nation’s welfare recipients.

A recent Next 10 report, prepared by Beacon Economics, has provided another opportunity for celebration. The Los Angeles Times’ coverage of the report is here. Their reporter, Chris Kirkham, provides a straight-forward summary, including charts not in the original report and quotes from people who might not be expected to be mindless cheerleaders. Full disclosure: He tried to interview me, but I was unavailable.

My favorite coverage was a celebratory piece at The National Memo, by one Froma Harrop, titled High Taxes, Regulations, and a Swell Economy. Try telling the children of one of the several families living in a single-family home, children with little prospect of ever living a middle-class lifestyle, that California’s economy is swell. Try telling that to the huge numbers of long-term unemployed in California’s Central Valley, or one of the many people who, like Martin Saldana, have been poorly served by California’s swell economy. California’s economy might be swell, but only for a portion of the population.

Harrop, and apparently large numbers of California’s comfortable establishment, don’t appear to care much about their less-fortunate fellow citizens. She’s channeling Marie Antoinette when she says “OK. Those who can’t pay the price—or who want bigger spaces—can and often do consider other parts of the country.”

Right. What about all the people who provide services to California’s wealthy coastal residents in places like Monterey and Santa Barbara? What about counties like Napa and Ventura that insist, by law, that land be set aside for agriculture, an industry that employs thousands, but can’t survive and pay wages that would allow a respectable standard of living in these high-cost counties?

This time the celebration turns out to be about nothing. The Next 10 report is seriously flawed. The first hint of weakness is on the first page of the actual report, page 4 of the document, where they say “This analysis is trying to show….” Serious analysis attempts to answer questions, not support a pre-conceived opinion.

The next clue is Table 1. In a report filled with time series, the authors present data on one point in time, say that California has the fourth highest net job growth rate, and conclude all is good. Why would they do that? Could it be that the time series doesn’t support the narrative?

Actually, they used the only recent year where California performed significantly better than the United States. Here’s the data in time series. It’s similar to a chart in the Los Angeles Times’ piece. We compare California’s net job creation rate with that of the United States:

Doesn’t look so spectacular, does it?

Maybe the rankings would look better? Below is a chart of California’s ranking going back to 1977. Remember, one is good, 50 is bad:

The narrative isn’t supported here either. California has only ranked in the top 20 twice since 2006, and over that time it’s been in the bottom 20 three times. Indeed, California has been in the top ten only once since 2001. That was the data point they used in their analysis.

The report has other weaknesses.

Consider the charts 4a through 4f. Combined, they purport to show that for California, firms of all ages were net job creators every year. There is no year where they show firms of any age group having net job losses. Given the well-documented massive California job losses in the past few recessions, this is simply unbelievable.

Indeed, a close look at the charts yields apparent internal inconsistencies. Chart 4e is an example. In 2002, 2009, and 2010 job destruction rates were far greater than job creation rates, but somehow they report that net job creation rates managed to remain positive in each of these years? For the record, we built a chart using aggregate data that show net job loss rates for all California establishments of -2.2, -5.8, and -3.1 for the years 2002, 2009 and 2010, respectively:

California’s apologists don’t do themselves any favors by resorting to such shoddy and misleading work. California has had some good job years recently. It also has some huge strengths. These include a world-leading venture capital infrastructure, a world-leading climate, and a fantastic location between Asia and the massive American consumer market.

California has some huge challenges too, including the poverty, inequality, and limited opportunity for minorities. Ignoring these challenges and exaggerating the state’s strengths is a guarantee that California will never be the land of opportunity that it was — or could be.

Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

January 19, 2016

America’s Next Boom Towns: Regions to Watch in 2016

Which cities have the best chance to prosper in the coming decade? The question is a complex one, and as the economy changes, so, too, will the best-positioned cities.

To identify the cities most likely to boom over the next 10 years, we took the 53 largest metropolitan statistical areas in the country (those with populations exceeding 1 million) and ranked them based on eight metrics indicative of past, present and future vitality. We factored in, equally, the percentage of children in the population, the birth rate, net domestic migration, the percentage of the population aged 25-44 with a bachelor’s degree, income growth, the unemployment rate, and population growth.

The results show two divergent kinds of ascendant cities. One is driven by the tech industry, the in-migration of educated people and sharply rising incomes; the other type is what we describe as “opportunity cities,” which tend to have a diverse range of industries, lower costs and larger numbers of families. We may be one country, but the future is being shaped by two very different urban archetypes.

The Lone Star Model

The most vital parts of urban America can be encapsulated largely in one five-letter word: Texas. All four of Texas’ major metro areas made our top 10. Austin, Houston, Dallas-Ft. Worth and San Antonio are very different places, but they all have enjoyed double-digit job growth from 2010 through 2014, well above the national average of 8.1%. They also all have posted income growth well above the national average.

But the biggest divergence from the pack may be demographics. The Texas cities have become major people magnets, with huge growth in their populations of young, educated millennials and households with children. The clear star of the show is No. 1-ranked Austin, which has become the nation’s superlative economy over the past decade.

Austin leads the pack in terms of population growth, up 13.2% between 2010 and 2014, in large part driven by the strongest rate of net domestic in-migration of the 53 largest metropolitan areas over the same span: 16.4 per 1,000 residents. The educated proportion of its population between 25 and 44 is 43.7%, well ahead of the national average of 33.6%, although somewhat below the traditional “brain center” cities of the Northeast and the West Coast.

The other Texas cities also do well across the board, with strong domestic in-migration, low unemployment and a rising population of young families. The biggest question marks going ahead involve No. 6 Houston, which benefited heavily from the energy boom and now is dealing with the consequences of the oil price collapse. Most economists do not see a total meltdown as occurred in the 1980s, but it would not be a surprise to see Houston fall out of our top 10 until energy prices recover. Economist Patrick Jankowski projects some 9,000 layoffs in the energy sector locally in 2016 but enough growth elsewhere — for example 9,000 new jobs in medical services — to keep employment expanding, although far below the pace of the last few years. The other, less energy-dependent Texas metro areas seem likely to continue their stellar performance.

The Flyover Superstars

There are several dynamic, fast-growing metro areas elsewhere in the country that seem likely to increase their status in the coming years, mostly in the Southeast and the Intermountain West. Like the Texas cities, these areas enjoy lower costs than the Northeast or California, notably for housing, and tend to be pro-business. All are experiencing significant population growth.

No. 2 Salt Lake City and No. 4 Denver have been expanding for years, with significant tech-sector growth. Both are logging population increases, with Denver benefiting from strong domestic in-migration while Salt Lake City has the highest birth rate among major metro areas, 16.9 per 1,000 women from 2010-14, largely due to its fecund Mormon population.

The Southeast has a number of ascendant cities led by No. 5 Raleigh, which, like Austin, has emerged as a tech hot-spot. Some 49% of all Raleigh residents aged 25 to 44 have a four-year degree, higher than any other metro area in the South. The national average is 33.6%.

The Glorious Gated Community

Unlike the rest of our rising cities, the Bay Area’s two major metro areas — No. 3 San Jose and No. 9 San Francisco — do not boast rapid population growth, and have low rates of family formation and births. Yet the area’s technology domination has made it so rich that it blows by most regions in terms of positioning for the future.

The big divergence here is income growth. Since 2010, the two metro areas have enjoyed the strongest expansion in earnings in the nation – 9.2% in the San Jose area between 2010 and 2015 and 7.8% in San Francisco. Silicon Valley and the Bay Area also boast extraordinarily well-educated young workforces. In San Jose 53.5% of workers aged 25 to 44 have a college degree, the third-highest share in the nation, and San Francisco ranks fourth at 52.4%.

So why are people not flocking to these areas? San Jose is net negative for domestic migration over the time we examined while San Francisco made modest gains only after years of net out-migration. Much of the problem lies in high housing prices, which, notes Dartmouth College economist William Fischel, have turned the Bay Area and the Valley into an “exclusionary region” inaccessible to all but the wealthy and highly gifted.

Given the growing importance of the technology industry, it seems likely that this gated region will continue to thrive in the years ahead, albeit with a low level of new family formation, relatively few children and a limited middle class. It’s a model that some cites may wish to duplicate but few will be able to. Perhaps the most promising candidate to join this list is No. 15 Seattle, which also has experienced strong job growth, largely from technology and boasts a large population of college graduates.

The Fading Big Enchiladas

Perhaps the most glaring omissions at the top of our list are America’s three largest metropolitan areas: New York, Los Angeles and Chicago. Of the three, New York does best, but only well enough for 36th place, hardly what one would expect for America’s, and arguably the world’s, premier city.

New York has high costs like San Francisco but a far more bifurcated economy and demographics. Wall Street may be approaching the end of an epic run, but overall incomes in New York have fallen 0.5% since 2010. Employment has expanded a respectable 7.3% over the past five years, roughly the national average, but the metro area has the highest rate of domestic out-migration in the country.

Similar dynamics have lowered future prospects for Los Angeles and Chicago. Ranked 39th, Los Angeles has posted better job growth than New York at 10.2%, but its income losses were also more severe, down 3.8%. As in Gotham, the elites of Southern California in entertainment, real estate and technology may be thriving, but the vast majority are not doing so well, as manufacturing, construction and business services have lagged. Los Angeles’ population — more heavily Latino and African America — is also less well-educated, with only 34.8% of adults 25 to 44 holding bachelor’s degrees, a good 20 points less than their San Francisco-area competitors.

Chicago, ranked 40th, appears to have worse prospects. For all its problems, Los Angeles still dominates entertainment, has the largest port in the country, close Pacific Rim connection and enjoys the finest weather on the continent. Chicago has none of those advantages, although it boasts a very attractive downtown. The region around the magnificent mile is not doing well, with low job and population growth, stagnant incomes and strong out-migration. Urban analyst Pete Saunders describes Chicago’s economy as “one-third San Francisco and two-thirds Detroit.” That seems more true than many Windy City boosters would like to admit.

Future Of The Future

Of course the future is not completely predicable and many things could change in the coming years. In the short run, as mentioned above, the energy boom towns will take a bit of a hit. Energy slowdowns could impact other cities with a concentration in this industry, notably Denver, Salt Lake and even Columbus, near Ohio’s big natural gas and oil reserves.

But other factors suggest that these lower-cost cities will do well into the future. Columbus, Ohio, for example, may see its job growth impacted, but the benefits of strong in-migration will linger, particularly the growing numbers of college-educated millennials who have headed to it and other more affordable Rust Belt metro areas in recent years.

Ultimately we may see the emergence of two distinct urban futures. One will emerge in elite “gated” regions such as San Francisco, San Jose, and, perhaps in the near term, Seattle. These areas will dominate many key tech sectors, and will continue to leverage their well-educated populations. The other will be more along the Texas model, diversified economies driven by lower costs, particularly for housing, diversified economies and increasingly well-educated populations.

Rather than being fundamentally incompatible, this enormous country should have room for both models. America needs its elite centers, but there also have to be cities for middle-class families. Each can claim a piece of the future.

2016 Regions to Watch Index
Rank	Region (MSA)	Score	Children age 5-14, 2014	Job Growth, 2010-2015	Popltn Change, 2010-2014	Earnings growth, 2010-2015	Domestic Mig rate 2010-2014	Birth rate, 2010-2014	Bachelor’s degrees, Age 25-44, 2014	Unemplymt, Nov 15
1	Austin	75.6	13.7%	19.1%	13.2%	1.5%	16.4	13.8	43.7%	3.3%
2	Salt Lake City	66.3	16.2%	14.8%	6.0%	2.1%	-0.1	16.9	31.2%	2.9%
3	San Jose	65.6	13.1%	21.3%	6.3%	9.2%	-1.8	13.1	53.5%	3.9%
4	Denver	63.2	13.6%	15.0%	8.3%	0.8%	9.3	13.1	43.9%	3.2%
5	Raleigh	63.1	14.7%	15.4%	10.0%	-1.6%	11.0	12.9	49.0%	4.6%
6	Houston	63.0	15.2%	15.2%	9.6%	3.8%	7.4	15.0	32.5%	4.9%
7	Dallas	61.1	15.2%	15.0%	8.2%	0.7%	6.6	14.4	33.4%	4.0%
8	San Antonio	58.6	14.5%	12.5%	8.7%	1.1%	9.9	14.1	27.6%	3.8%
9	San Francisco	56.6	11.4%	15.7%	6.0%	7.8%	2.9	11.7	52.4%	3.9%
10	Oklahoma City	56.2	13.9%	9.3%	6.7%	3.5%	6.8	14.5	30.4%	3.6%
11	Nashville	56.1	13.3%	14.8%	7.3%	1.7%	8.9	13.1	37.8%	4.3%
12	Charlotte	54.3	14.1%	15.4%	7.4%	0.9%	8.8	12.8	37.6%	5.1%
13	Minneapolis	52.1	13.6%	8.7%	4.4%	-0.6%	0.1	13.3	44.9%	2.7%
14	Columbus	51.2	13.5%	10.8%	4.9%	0.7%	2.6	13.7	40.7%	3.9%
15	Seattle	50.9	12.2%	13.8%	6.7%	4.0%	4.3	12.8	43.1%	4.9%
16	Atlanta	50.8	14.6%	11.9%	6.2%	0.8%	3.5	13.3	38.2%	5.0%
17	Orlando	49.1	12.6%	16.6%	8.8%	-1.5%	8.2	12.1	31.0%	4.5%
18	Grand Rapids	48.2	14.0%	20.0%	3.9%	-2.2%	1.7	13.5	37.1%	5.2%
19	Phoenix	48.1	14.2%	12.9%	7.1%	-2.1%	6.5	13.7	29.3%	5.0%
20	Indianapolis	47.9	14.3%	11.0%	4.4%	-2.2%	2.1	13.8	36.4%	4.2%
21	Washington	47.8	12.9%	5.3%	7.0%	-3.4%	0.4	13.8	53.2%	4.1%
22	Portland	47.5	12.7%	12.2%	5.5%	3.1%	5.1	12.1	38.9%	4.8%
23	Kansas City	45.8	14.2%	6.9%	3.1%	-0.3%	-0.3	13.6	39.5%	3.9%
24	San Diego	44.1	12.1%	9.6%	5.4%	1.9%	0.3	14.0	38.7%	4.8%
25	Boston	43.1	11.4%	8.4%	3.9%	2.2%	-0.5	11.2	54.1%	4.1%
26	Cincinnati	39.4	13.6%	6.4%	1.6%	0.4%	-2.1	12.9	37.0%	4.2%
27	Louisville	39.3	13.0%	10.2%	2.8%	-1.2%	1.5	12.5	31.7%	4.2%
28	Riverside	39.0	15.0%	13.9%	5.1%	-2.7%	1.6	14.1	18.8%	6.1%
29	Jacksonville	39.0	12.7%	9.0%	5.5%	-2.4%	5.4	12.7	28.2%	4.7%
30	Richmond	38.3	12.7%	5.3%	4.3%	-2.4%	3.1	12.0	38.1%	4.2%
31	Detroit	37.5	12.9%	12.0%	0.0%	-1.6%	-4.6	11.6	33.9%	3.0%
32	Sacramento	36.7	13.3%	8.3%	4.4%	-0.6%	1.7	12.5	32.2%	5.5%
33	Tampa	35.8	11.5%	10.2%	4.7%	-1.6%	6.4	10.9	31.3%	4.6%
34	Miami	35.0	11.4%	12.6%	6.5%	-1.7%	0.9	11.4	31.3%	5.0%
35	Milwaukee	35.0	13.3%	4.9%	1.0%	-1.0%	-3.4	12.8	38.3%	4.4%
36	New York	35.0	12.1%	7.3%	2.7%	-0.5%	-6.3	12.7	44.8%	4.7%
37	Baltimore	34.9	12.4%	6.8%	2.8%	-1.2%	-0.6	12.3	43.9%	5.3%
38	Las Vegas	33.8	13.5%	13.6%	6.1%	-6.5%	4.7	13.2	22.4%	6.3%
39	Los Angeles	33.7	12.5%	10.2%	3.4%	-1.8%	-3.6	13.0	34.8%	5.3%
40	Chicago	32.9	13.3%	6.5%	1.0%	-0.1%	-6.0	12.7	41.7%	5.4%
41	Birmingham	31.9	13.1%	5.5%	1.4%	-1.1%	-0.6	12.9	32.3%	5.2%
42	St. Louis	31.8	12.8%	4.2%	0.7%	-0.4%	-3.3	12.2	38.4%	4.6%
43	Philadelphia	31.6	12.4%	3.8%	1.4%	-1.7%	-3.0	12.1	41.7%	4.6%
44	New Orleans	31.2	12.6%	4.5%	5.2%	-6.0%	4.7	12.7	33.4%	5.6%
45	Cleveland	30.1	12.3%	5.2%	-0.7%	0.3%	-4.3	11.2	34.5%	3.7%
46	Memphis	29.5	14.2%	3.6%	1.4%	-0.8%	-4.0	14.2	28.3%	6.1%
47	Pittsburgh	28.8	10.8%	3.9%	0.0%	2.6%	0.4	10.1	42.2%	4.5%
48	Virginia Beach	28.8	12.3%	1.0%	2.4%	-1.2%	-3.5	13.4	30.1%	4.6%
49	Tucson	25.3	12.3%	3.7%	2.5%	-3.9%	0.1	12.1	29.1%	5.3%
50	Buffalo	25.0	11.6%	3.7%	0.1%	0.3%	-2.3	10.6	36.8%	4.9%
51	Hartford	24.5	11.9%	5.5%	0.2%	-1.6%	-5.7	10.0	41.9%	4.8%
52	Rochester	23.9	11.9%	3.3%	0.3%	-2.5%	-3.9	10.8	36.6%	4.6%
53	Providence	23.3	11.5%	5.1%	0.5%	-0.4%	-3.2	10.4	33.2%	4.9%

Analysis by Mark Schill, Praxis Straetgy Group (mark@praxissg.com). The index incldues eight equally-weighted measures: share of population age 5-14, 5-year job growth, 5-year population change, 5-year real earnings growth, annual average domestic migration rate, annual average birth rate, share of young population with a bachelor’s degree, and current unemployment rate.

This piece first appeared in Forbes.

Mark Schill is a community process consultant, economic strategist, and public policy researcher with Praxis Strategy Group.

SaltLake City photo by Skyguy414.

January 14, 2016

Trump, Sanders, and the Precariat

While the white working class is shrinking in the US, it remains the largest voting block in the country. That may be why leaders of both parties are concerned that white working-class voters, especially in the Midwest and South, are supporting populist candidates like Donald Trump and Bernie Sanders. They don’t understand that many of these voters blame Wall Street, corporate leaders, and politicians – the East Coast establishment –for destroying their jobs and communities over the past few decades.

Recent polls suggest that almost 60% of Americans, both Democrats and Republicans, “don’t identify with what America has become.” According to Cliff Young and Chris Jackson, these “nativist” Americans are older, whiter, and less educated than the rest of the population – more working-class, in other words. For some middle-class professionals, this “nativism,” exemplified in support for Donald Trump’s racial comments, simply reinforces the assumption that the white working class is inherently racist and foolish. They conveniently ignore the way racism is resurfacing among the middle class as they, too, feel resentment over their economic displacement. As Barbara Ehrenreich warns, “Whole professions have fallen on hard times, from college teaching to journalism and the law. One of the worst mistakes this relative elite could make is to try to pump up its own pride by hating on those — of any color or ethnicity — who are falling even faster.”

The focus on racism and xenophobia ignores an essential reality: precarity is bringing working-class and middle-class voters together politically. As Guy Standing has argued, the emerging precariat is a political class in the making. We see this in the “Fight for $15.” The struggle to increase the minimum wage seeks economic improvement for both the non-college and college educated.

This growing political block not only shares economic resentment but also the underlying racism that has been baked into American culture. No doubt, many college-educated whites looking for work have blamed multiculturalism and affirmative action for their current economic position, and they are just as likely as working-class people to respond to Trump’s racist rhetoric.

As Dan Bolz has suggested, “Trump’s appeal . . . underscores the resistance to the changes the country’s transition have brought forward.” Paul Krugman has suggested that “moderate Republicans and Third Way Democrats” who had tried to explain inequality in terms of skill-biased technological change are now lamenting the rise of Democratic populism. At the same time, progressive Democrats have complained that Sanders has ignored racial inequality while pandering to those facing economic inequality.

Leading Republican pundits like David Brooks and George Will have tried to dismiss Trump, a sure sign of conservative establishment fear. This has led to a squabble with Will calling Trump a “bloviating ignoramus” and Trump responding that Will is the “dumbest and most overrated political columnist of all time.” Some would say that Trump’s attack on political correctness and emphasis on “hot button” issues offer just type of mud fight the white working-class base wants. But more thoughtful moderate Republican pundits understand that such battles will not secure that base. For example, writers like Ross Douthat and Michael Gerson have been ignored and marginalized by the Republican establishment. A decade ago, Douthat and Rahein Salem tried to solidify working-class support by developing sound policy proposals that would appeal to what they called “Sam’s Club” Republicans. The Republican establishment trashed their ideas, and these writers have been reduced to rehashing the social values debate of an earlier era. E.J. Dionne has said Republicans are having trouble taking on Trump not only because “they have delivered next to nothing to their loyal white, working-class supporters.”

The Democratic Party establishment has its own set of fears — about Bernie Sanders. With significant contributions from Elizabeth Warren, Sanders has tried to move the party to embrace policies that are consistent with its New Deal roots. In a speech at Georgetown University, Sanders stressed the disappearance of the middle class, noting that productivity gains and income have been going to 1% of Americans. According to Sanders, a handful of oligarchs now control economic and political life in the U.S. He reminded the audience of the fight over New Deal reforms and types of security it brought to working Americans. Sanders’s takeaway was that “True freedom does not occur without economic security.”

Hillary Clinton has much less appeal for many working-class and minority Democratic voters. While she has sidestepped her past support for her husband’s policies on crime, drugs, welfare, and trade, these voters have not forgotten his legacy. In commenting on these issues, Clinton tends to pander to voters, as when she says that she opposes the Trans Pacific Partnership (TPP “at this time.” No wonder polls consistently show that the American public doesn’t trust her (though polls suggest they do trust Hillary more than the current crop of Republican candidates on some issues).

The Democratic establishment doesn’t worry about Clinton’s occasional forays in populism, which they see as political maneuvering. As Politico has reported, “None of them think she really means her populism.” But Sanders’s populist talk makes them cringe, because he connects with working-class resentment. His speeches appeal to the deep sense of injustice, unfairness, and inequality that many in the new precariat, especially millennials and African Americans, feel toward the East Coast establishment that took away their jobs, houses, and community and now even threatens their Social Security.

Clinton’s wealthy donor base recognizes Sanders’s appeal as a threat to their interests. Democratic Party leaders and their Wall Street backers hope that the Sanders fever will pass quickly and their adherents will then fall in line and embrace Clinton as the only viable option.

If Clinton and her advisors can’t connect with the new populism, voters may well heed the implication from Republicans that nothing will change no matter who is elected. They’re wrong, of course. With a fragile and deeply unequal economy and an aging Supreme Court, the stakes are too high. But if Democrats are to win this year, they must understand that the populism that drives support for Trump is also central to Sanders’s appeal. Winning the 2016 election will require the kind of grassroots support that helped elect President Obama twice, but to build that support Democrats will have to address the disaffection and resentment of the new precariat.

This piece first appeared at Working Class Perspectives.

John Russo is a visiting fellow at Kalmanovitz Initiative for Labor and Working Poor at Georgetown University and at the Metropolitan Institute at Virginia Tech. He is the co-author with Sherry Linkon of Steeltown U.S.A.: Work and Memory in Youngstown (8th printing).

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

January 12, 2016