New Geography

Category: Economics

  • The Rise of the Efficient City

    Smaller, more nimble urban regions promise a better life than the congested megalopolis.

    Most of the world’s population now lives in cities. To many academics, planners and developers, that means that the future will be dominated by what urban theorist Saskia Sassen calls “new geographies of centrality.” According to this view, dense, urban centers with populations in excess of 20 million—such as metropolitan Tokyo, New Delhi, Sao Paolo and New York—are best suited to control the commanding heights of global economics and culture in the coming epoch.

    In fact, the era of bigger-is-better is passing as smaller, more nimble urban regions are emerging. These efficient cities, as I call them, provide the amenities of megacities—airports, mass communication, reservoirs of talent—without their grinding congestion, severe social conflicts and other diseconomies of scale.

    Megacities such as New Delhi, Mumbai, Sao Paolo and Mexico City have become almost unspeakably congested leviathans. They may be seen as “colorful” by those engaging what writer Kennedy Odede calls “Slumdog tourism.” They may also be exciting for those working within the confines of “glamour zones” with high-rise office towers, elegant malls, art galleries and fancy restaurants. But most denizens eke out a meager existence, attractive only compared to even more dismal prospects in the countryside.

    Consider Mumbai, with a population just under 20 million. Over the past 40 years, the proportion of its citizens living in slums has grown from one in six to more than half. Mumbai’s brutal traffic stems from a population density of more than 64,000 per square mile, fourth-highest of any city in the world, according to the website Demographia.

    Many businesses and skilled workers already are moving to smaller, less congested, often better run cities such as Bangalore, where density is less than half that of Mumbai. Much of this new growth takes place in campus-like settings on the edge of town that take advantage of newer roads, better sanitation systems and sometimes easier access to airports. Companies like Alcatel-Lucent and Infosys offer their employees facilities more similar to those of Silicon Valley or suburban Austin than to Mumbai or Kolkata (formerly Calcutta).

    Consider also Singapore and Tel Aviv, which are among the best models for the efficient cities of the future. At its founding in 1965 after independence from Malaysia, Singapore’s per capita GDP was about that of Guatemala and well below that of Venezuela and Iraq. Today it equals, on a purchasing power basis, that of most Western cities including London, Sydney and Miami.

    The city-state bears no resemblance to the typical unsanitary and disorderly tropical metropolis. Singapore’s roughly five million citizens live under efficient (if heavy handed) government. With its modern port, airport and excellent transport network, Singapore consistently ranks as the No. 1 locale for ease of doing business by the World Bank. Over 6,000 multinational corporations including Seagate, IBM and Microsoft have a large presence in Singapore.

    Tel Aviv represents a decidedly different approach to building the efficient city. With roughly two million people in its metropolitan area, this little dynamo produces the vast majority of Israel’s soaring high-tech exports, is home to a preponderance of the country’s financial institutions and has established itself as the global center of the diamond industry. Incomes in the region are as much as 50% above Israel’s national average.

    Tel Aviv’s pleasure-loving denizens may differ markedly from more controlled Singaporeans—or the usually more religious citizens of Jerusalem—but they employ many of the key efficient city advantages: a sharp focus on business, a well-developed sense of place and a first-class communications infrastructure. The city’s tech industry includes firms such as Microsoft, Cisco, Google and IBM. It is home to Israel’s only stock exchange and most of the country’s resident billionaires.

    The U.S. is also embracing the efficient city. Between 2000 and 2008, notes demographer Wendell Cox, metropolitan areas of more than 10 million suffered a 10% rate of net outmigration. The big gainers were generally cities with 100,000 to 2.5 million residents. The winners included business-friendly Texas cities and other Southern locales like Raleigh-Durham, now the nation’s fastest-growing metro area with over one million people. You can add rising heartland cities like Columbus, Indianapolis, Des Moines, Omaha, Sioux Falls, Oklahoma City and Fargo.

    Some of these—such as Austin, Columbus, Raleigh-Durham and Fargo—thrive in part by being college towns. Others like Houston, Charlotte and Dallas have evolved into major corporate centers with burgeoning immigrant populations. But they thrive because they are better places for most to live and do business.

    Take the critical issue of getting to work. According to the American Community Survey, the average New Yorker’s daily trip to work takes 35 minutes; the average resident of the Kansas City or Indianapolis region gets to the office in less than 13 minutes. That adds up in time and energy saved, and frustration avoided.

    The largest American cities—notably New York, Los Angeles and Chicago—also show the most rapid decline in middle-class jobs and neighborhoods, with a growing bifurcation between the affluent and poor. In these megacities, high property prices tend to drive out employers and middle-income residents. By contrast, efficient cities are where most middle- and working-class Americans, and their counterparts around the world, will find the best places to achieve their aspirations.

    This article originally appeared at the Wall Street Journal.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. 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 wili_hybrid

  • The Toto Strategy: How Kansas Can Save Barack Obama’s Presidency

    Here’s an idea that could save Barack Obama’s presidency: Give up those troubling Chicago roots and get back to Kansas. If, as Dorothy observed in the Wizard of Oz, “We’re not in Kansas anymore,” get the Wizard to send you back there soon.

    Barack Obama owes much to Kansas–and the Great Plains in general–something he used to acknowledge often enough. Not only was he largely raised by products of that region (his mother and grandmother hail  from  the Sunflower State), but also his remarkable victory over Hillary Clinton during the presidential primaries was built largely by winning first in the Iowa caucuses, followed by surprising victories in Kansas, North Dakota, Minnesota and Illinois.

    But the midterm elections saw much of the central region’s Congressional Democratic contingent “annihilated,” using Ron Brownstein’s word. Stalwart senators like Byron Dorgan of North Dakota politely gave up without a fight, and the Democrats lost House seats in both of the Dakotas, Minnesota and Kansas. They lost four in Illinois. The political imperative for Obama to shift his focus to the Heartland has never been clearer.

    By embracing  his mother’s families historic heartland roots–as he did in the early part of the primary campaign–Obama could energize a listless presidency increasingly disconnected from much of mainstream America.  This would help the president and his party emerge from their coastal redoubts, college towns and big cities like Chicago–which is crucial since there aren’t enough electoral votes in these areas in win re-election, particularly after the reapportionment coming following the census.

    A Kansas–or “Toto”–strategy would provide the economic focus or bringing the country out of the recession. Illinois teeters on the edge bankruptcy, but Kansas and most Plains states remain fiscally healthy  states.  Although hardly a high flier, Kansas’ unemployment rate — a mere 6.6% — stands well below the national average; of the ten states with the lowest unemployment rates, five are in the Plains, including Kansas, Iowa, Minnesota and the Dakotas. Over the past decade, the region between Texas and the Dakotas has created more jobs per capita than the Northeast, the West Coast, the Great Lakes or the Southeast.

    Kansas and the rest of Great Plains also represent the part of America best positioned to benefit from changes in the global economy. Much is made about the “new economy” based on high-end intellectual products like software and biotechnology, venture capital and tech companies. Kansas is widely seen as falling way beyond coastal states like Massachusetts, Washington and Maryland, according to a recent survey by the Kansas City-based Kaufmann Foundation.

    But our country’s economic future may rely even more on more mundane fields, notably agriculture, manufacturing and energy, than the increasingly competitive information economy. Kansas ranks seventh among the nation’s agricultural states; Plains states Iowa, Texas, Nebraska, Illinois and Minnesota also rank in the top 10.  Growing demand for food from China, India and other developing countries places this part of the country in a fortuitous position. The U.S. agricultural trade balance jumped from roughly $5 billion in 2005 to $35 billion in 2008. This year’s corn crop, notes North Dakota State business professor Debora  Dragseth, could be the largest in the nation’s history. Overall the U.S. produces almost two-thirds of the world’s product of this much sought-after commodity.

    Of course, the Plains has its share of the large corporate farms detested among blue-state intellectuals, but most are family owned, including a growing number of smaller, specialized and organic producers. Due to strong demand from around the world, notes Creighton University economist Ernie Goss, the Plains’ “rural Main Street economy“ has picked up steam both in terms of jobs and income over the past year.

    The Plains also figures prominently in the country’s critical energy future.  Energy constitutes the largest component by far in our persistent trade deficit, accounting for roughly half the total. Texas has become a national leader in wind-driven energy, while the whole region has been described as “the Saudi Arabia of wind.”

    But wind, like solar power, is not a game-changer in the short run–in the Plains or anywhere else for that matter. For one it depends on huge subsidies roughly five times per kilowatt hour those for fossil fuels . More troubling still the industries associated with them–the supposed sources of miraculous numbers of “green jobs”–also are increasingly dominated by China.

    For the foreseeable future fossil fuels, which generate 84% of our power (all but 1% or 2% of the rest comes from nuclear or hydro-electrical power), will be more pertinent to our economic resurgence than renewables;  by 2035, according to federal Energy Information Administration, they will still account for roughly 75%.

    Unlike green energy, in which China and Europe remain stronger, the U.S. remains the world leader in fossil fuel technology. The industry’s global hub is in Houston, but many Plains cities, like Dallas, Oklahoma City, Tulsa and Bismarck, play important roles. Kansas ranks eighth among oil producers; Texas, Oklahoma, North Dakota and Montana also stand among the nation’s top 10 oil-producing states. More important, unlike carbon-crazed California, which still ranks third in total oil production, these states seem in favor of producing more of the gooey stuff.

    The Plains are also emerging as big players in what should be the key energy source of the next decade: natural gas. The country’s reserves of natural gas have grown rapidly; it is widely estimated we have 100 years supply of the stuff. Far cleaner than either coal or oil, our nation’s natural gas reserves are so great that energy executives in Texas are now talking about the possibility of becoming an energy exporter again.

    Kansas, for its part, is among the top 10 gas producers–along with Texas and Oklahoma. Colorado, New Mexico and Wyoming, other top ten producers, inhabit the western end of the Plains. A shift to natural gas for everything from electrical generation to fuel for trucks, cars and buses would do more to improve the country’s sagging finances than anything else on the horizon. It will also generate a lot of both high-end engineering and skilled blue collar jobs.

    Finally, the Plains are becoming the new frontier of America’s still potent manufacturing capacity. This is the region where, over the past year, goods-producing jobs have been growing fastest.   A steady, relatively well-educated workforce–North Dakota now ranks just behind Washington, D.C., and Massachusetts for percentage of people 25 and 34 with a college degree–is becoming a major lure.

    As a born-again Kansan, President Obama can rebuild his reputation and our economy. Rather than being dissed as a taciturn intellectual, he can be respected as reticent, self-controlled Plainsman, a Gary Cooper, if you will. And he wouldn’t be out of place: Kansas is far less homogeneous than when Obama’s grandparents left there. Whites are already a minority in four Kansas counties, with immigrants coming from places as diverse as Mexico, Myanmar, Ethiopia, Sudan and Somalia.

    The culture of the Plains produced the mother who bore our president, and the grandmother who raised him. He certainly owes more to Kansas than to Kenya or Indonesia–or maybe even Illinois. A revival of Obama Kansasness may not thrill all his coastal fans, but it could help the President and his party find a way out of the political wilderness.

    This article 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. 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 earlycj5

  • Divining The Stock Market’s Future

    Like the rest of us, I pick over the stock market’s runic inscriptions to find meaning in earnings reports, ratios, analyst reports, and trend lines, hoping to divine the traces of an orderly world—something it clearly is not.

    In modern nations, especially the United States, the averages of stock exchanges have, at least psychologically, become synonymous with the national pulse and well-being. America was a happier and more prosperous country when the Dow Jones industrial average was above 14,000, as opposed to its current levels of around 10,000. To be more precise, the country is about thirty percent less happy than before the crash of 2008.

    What has accounted for the changes in the market, not to mention the selloff in the national psyche?

    A favorite book about the market psychology of the U.S. economy, Clement Juglar’s “A Brief History of Panics,” was published in 1916. It makes the point that since the founding of the republic, the country has experienced booms and busts roughly every ten years, and that the market has three phases: Panic, when assets get dumped; Liquidation, a period of deflation, where we are now; and Prosperity, when credit is easy, people buy things, and stocks go up.

    For the moment, the stock market, like the economy at large, is in Liquidation. Few investors wake up in the morning with the idea of acting on a tip that they heard whispered at a club dinner. Buying stocks is something that your grandfather did, probably in a drab suit and a kind of Jack Ruby hat.

    Are stocks a good deal? The overall exchange is in the doldrums — real estate is bust, the only new employer is the Census Bureau, banks are black holes. Dow Theorist Richard Russell advises his subscribers, “We’re now in the process of building one of the largest tops in stock market history. The result, I think, will be the most disastrous bear market since the ’30s, and maybe worse.”

    But unless you are a gold bug, even now stocks are better deals than the alternatives: lending your money to a wobbly government (T-bills and bonds to insolvent nations), leaving it on deposit at a bank (zero return, and bank balance sheet risk), or flipping condos in Miami (do you really want to be a landlord?).

    I still believe there are quality stocks that are cheap enough to buy, and, chosen well, stocks throw off cash, offer an inflation hedge (those that can reprice their products easily), and can be bought in any amount. In high school I invested $180 in an obscure company my father had never heard of, Toyota. Wish I still had it.

    The reason stocks are languishing, however, is that most investors feel burned by the collapse. They bought things that their brokers, their friends, or their golf buddies suggested, and those financial instruments went up and then down, for reasons few understand.

    Take GE. When it was $57 a share, and growing at twenty percent a year, CEO Jack Welch was a genius and writing books with modest titles like “Leadership” or “Winning.” The company was “well positioned,” and, according to most brokers, a client’s portfolio “needed a little” for the long term. Anyone who had it made money.

    Now it’s $15, and is probably a better company than when it was at $57, but nobody wants any of it. Welch is remembered as just another guy who raked in millions in stock options, treated the company like a honey pot, and dumped his wife for a hot editor.

    Even at $15, however, GE is still expensive to buy. It’s price-earnings ratio is twelve times (meaning you give them $12 for every $1 you get back in earnings), and the yield is 3.2 % (what you earn while holding the share). GE would actually be a good deal when the stock price drops to $10, the P/E is eight, and the yield is 5.4 %. From that low entry point, you will stay “in the money” for a long time.

    What ruined the stock market in 2008? I would argue that the government’s demand for funding collapsed the pyramid schemes on which modern investment banks, not to mention stock markets, were built. In Juglar’s phrase, it was a panic of liquidity.

    The federal demand to fund the U.S. deficit and the suspicious balance sheets of Fannie Mae and Freddie Mac dried up the easy money that had previously allowed the Lehman brothers to party on in commercial real estate. In turn, the stock market ran up on the fumes of bank and personal leverage, much drawn from home equity. Now that money is propping up mattresses.

    Much of the stock market collapse, however, is because buyers will only pay a low premium for shares. A stock that once traded at twenty times it earnings, but is now trading at twelve times earning, will have lost almost half its market value. Ironically, the underlying fundamentals of such a company may be little changed.

    Look at Johnson & Johnson. Most of its key ratios have improved steadily over the last ten years, yet at the same time it’s stock price is down, because investors will not pay the multiple that they paid previously to own it.

    In 2007, J&J earned $3.63 a share, when it traded around $67 (that’s a P/E of eighteen). Now it brings in about $4.84 a share, yet the company’s stock price is $58. It still sells for a premium of twelve times, which is low for Johnson & Johnson, but not the kind of bargain that would tempt Warren Buffett, who wants the companies he buys to sell for a P/E under ten.

    To make money in the stock market, forget about “market sentiment,” “investor psychology,” or Jim Kramer’s “Mad Money.” Instead, think of the stock market as a mall that has high-priced boutiques, discounters, mom and pop stores, and even Wal-Mart. Who in America doesn’t understand malls?

    When you buy from the elegant boutiques (stocks in favor, selling at high premiums, with brands that everyone wants, like Google), know that you are indulging an impulse, fashion buy, and that someday you may be trying sell the equivalent of last year’s Gucci loafers on eBay. (“Common stock, hardly used, a lot of buzz about this co., you pay shipping.”)

    In the stock-market mall, however, there are other shops, with companies that no one wants or has heard off, that will let you share in their profits, treat your money with respect, and even pay you dividends while you own them. Search for companies that have a sustained record of profitability, regularly increase their dividends, have relatively low debt relative to their capital, employ drab managers who drive Buicks, and have diverse products with broad appeal.

    Never buy a stock that has naming rights to a professional stadium.

    It helps if this company, for reasons beyond its control, has been “beaten up” in the stock market and if it trades at a historic low premium. In summer 1982, GE traded at a P/E of five times its earnings. When I started in banking, banks sold for less than book value, and a P/E of about seven times. At their peak, some traded at 32X earnings.

    If you are nervous about owning stocks, only buy a few, in companies that you can study and understand. Sell them the moment they reach your “selling price,” which is almost the moment when you look at your statement and think, “That’s doing okay.”

    In looking at the cycle of the American economy and its markets, Juglar saw Panic lasting a few months to a few years, Liquidation going on for several years, and Prosperity running five to seven years.

    Think roughly of the bull markets between 1982-89, and 1996-2001, and 2003-2008, and they reasonably track Juglar’s timetables. Yes, the current phases of Panic and Liquidation are no fun, but the pattern was familiar in 1916.

    Juglar’s investment advice: “Buy when the decline caused by a panic has produced such liquidation that discounts and loans, after steady and long-continued diminution, either become stationary for a period, or else increase progressively coincident with a steady increase in available funds; and sell for converse reasons.”

    I prefer the more shorthand market expression: “The only time to buy a stock is when you feel like throwing up.”

    Photo by roadsidepictures of Psychic World, Las Vegas, Nevada, built in 1938.

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited, winner of Foreword’s bronze award for best travel essays at this year’s BEA. He is also editor of Rules of the Game: The Best Sports Writing from Harper’s Magazine. He lives in Switzerland.

  • How Liberalism Self-destructed

    Democrats are still looking for explanations for their stunning rejection in the midterms — citing everything from voting rights violations and Middle America’s racist orientation to Americans’ inability to perceive the underlying genius of President Barack Obama’s economic policy.

    What they have failed to consider is the albatross of contemporary liberalism.

    Liberalism once embraced the mission of fostering upward mobility and a stronger economy. But liberalism’s appeal has diminished, particularly among middle-class voters, as it has become increasingly control-oriented and economically cumbersome.

    Today, according to most recent polling, no more than one in five voters call themselves liberal.

    This contrasts with the far broader support for the familiar form of liberalism forged from the 1930s to the 1990s. Democratic presidents from Franklin D. Roosevelt to Bill Clinton focused largely on basic middle-class concerns — such as expanding economic opportunity, property ownership and growth.

    Modern-day liberalism, however, is often ambivalent about expanding the economy — preferring a mix of redistribution with redirection along green lines. Its base of political shock troops, public-employee unions, appears only tangentially interested in the health of the overall economy.

    In the short run, the diminishment of middle-of-the-road Democrats at the state and national level will probably only worsen these tendencies, leaving a rump party tied to the coastal regions, big cities and college towns. There, many voters are dependents of government, subsidized students or public employees, or wealthy creative people, college professors and business service providers.

    This process — driven in large part by the liberal attachment to economically regressive policies such as cap and trade — cost the Democrats mightily throughout the American heartland. Politicians who survived the tsunami, such as Sen. Joe Manchin in West Virginia, did so by denouncing proposals in states where green policies are regarded as hostile to productive local industries that are major employers.

    Populism, a traditional support of liberalism, has been undermined by a deep suspicion that President Barack Obama’s economic policy favors Wall Street investment bankers over those who work on Main Street. This allowed the GOP, a party long beholden to monied interests, to win virtually every income segment earning more than $50,000.

    Obama also emphasized an urban agenda that promoted nationally directed smart growth, inefficient light rail and almost ludicrous plans for a national high-speed rail network. These proposals appealed to the new urbanist cadre but had little appeal for the vast majority of Americans who live in outer-ring neighborhoods, suburbs and small towns.

    The failure of Obama-style liberalism has less to do with government activism than with how the administration defined its activism. Rather than deal with basic concerns, it appeared to endorse the notion of bringing the federal government into aspects of life — from health care to zoning — traditionally controlled at the local level.

    This approach is unpopular even among “millennials,” who, with minorities, represent the best hope for the Democratic left. As the generational chroniclers Morley Winograd and Michael Hais point out, millennials favor government action — but generally at the local level, which is seen as more effective and collaborative. Top-down solutions from “experts,” Winograd and Hais write in a forthcoming book, are as offensive to millennials as the right’s penchant for dictating lifestyles.

    Often eager to micromanage people’s lives, contemporary liberalism tends to obsess on the ephemeral while missing the substantial. Measures such as San Francisco’s recent ban on Happy Meals follow efforts to control the minutiae of daily life. This approach trivializes the serious things government should do to boost economic growth and opportunity.

    Perhaps worst of all, the new liberals suffer from what British author Austin Williams has labeled a “poverty of ambition.” FDR offered a New Deal for the middle class, President Harry S. Truman offered a Fair Deal and President John F. Kennedy pushed us to reach the moon.

    In contrast, contemporary liberals seem more concerned about controlling soda consumption and choo-chooing back to 19th-century urbanism. This poverty of ambition hurts Democrats outside the urban centers. For example, when I met with mayors from small, traditionally Democratic cities in Kentucky and asked what the stimulus had done for them, almost uniformly they said it accomplished little or nothing.

    A more traditional liberal approach might have focused on improvements that could leave tangible markers of progress across the nation. The New Deal’s major infrastructure projects — ports, airports, hydroelectric systems, road networks — transformed large parts of the country, notably in the West and South, from backwaters to thriving modern economies.

    When FDR commissioned projects such as the Tennessee Valley Authority, he literally brought light to darkened regions. The loyalty created by FDR and Truman built a base of support for liberalism that lasted for nearly a half-century.

    Today’s liberals don’t show enthusiasm for airports or dams — or anything that may kick up some dirt. Deputy Assistant Secretary of the Interior Deanna Archuleta, for example, promised a Las Vegas audience: “You will never see another federal dam.”

    Harold Ickes, FDR’s enterprising interior secretary, must be turning over in his grave.

    The administration would have done well to revive programs like the New Deal Works Progress Administration and Civilian Conservation Corps. These addressed unemployment by providing jobs that also made the country stronger and more competitive. They employed more than 3 million people building thousands of roads, educational buildings and water, sewer and other infrastructure projects.

    Why was this approach never seriously proposed for this economic crisis? Green resistance to turning dirt may have been part of it. But undoubtedly more critical was opposition from public- sector unions, which seem to fear any program that threatens their economic privileges.

    In retrospect, it’s easy to see why many great liberals — like FDR and New York City Mayor Fiorello LaGuardia — detested the idea of public-sector unions.

    Of course, green, public-sector-dominated politics can work — as it has in fiscally challenged blue havens such as California and New York. But then, a net 3 million more people — many from the middle class — have left these two states in the past 10 years.

    If this defines success, you have to wonder what constitutes failure.

    This article originally appeared in Politico.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University and an adjunct fellow with 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: Tony the Misfit

  • The Other Chambers of Commerce

    The recent political conflict between the Obama Administration and the U.S. Chamber of Commerce has thrown a new spotlight on an old communication problem. Local chambers of commerce, although they predate the U.S. Chamber by nearly a century and a half, often are assumed to be part of the U.S. Chamber, or otherwise under its direction. They aren’t. They are independent.

    During the pre-election controversy this year, it was clear that many people, including many chamber members, did not know this fact. They believe that U.S. Chamber President Tom Donohue and his colleagues on H Street directly or indirectly control all that local chambers do. But Donohue and his staff don’t exercise such control, nor do they want to.

    Few people think about what chambers do locally. For example, who knows that Elliot Tiber, president of the Bethel, N.Y., Chamber of Commerce, secured the permit for Woodstock?

    It was also a local chamber – the Business Men’s League of Atlantic City – that came up in 1920 with the idea of a festival to keep tourists in town after Labor Day. Pretty women in beachwear would turn out to be the centerpiece of the annual event. We have that business group (now called the Greater Atlantic City Chamber) to thank for the Miss America Contest.

    Was Charles Lindbergh’s plane called The Spirit of Enterprise (the U.S. Chamber’s tag line)? No, the flying bucket of bolts was, of course, The Spirit of St. Louis. The president of the St. Louis Chamber came up with the name in order to promote the great river city. And why should Lindbergh object? The chamber president also raised most of the money for the aircraft.

    And who sent out the promotional brochure that enticed the first movie producer to southern California in 1907? It was the Los Angeles Chamber of Commerce. In nearby Hollywood a chamber was later active as well, helping re-fashion the famous Hollywood sign out of a decaying advertisement for a real estate development called “Hollywoodland.”

    Moreover, there’s a guy in a suit present next to the glamorous celebrities who get their photos taken when their stars are set in the Hollywood sidewalk. Who is that business man? It’s Leron Gubler, president of the Hollywood Chamber of Commerce, which invented and maintains the Walk of Fame.

    Most of the thousands of things that local chambers have done and do are far removed from the big national issues that embroil the U.S. Chamber. Sure, most of the chambers in the country agree with and support the lion’s share of the U.S. Chamber’s positions. Although the goals are often the same, the priorities, issues, methods, leadership and, importantly, ownership are not.

    Local chambers have shown themselves perfectly able to get into fights of their own, without orders from a non-existent chamber of commerce command center.

    Was it the national chamber’s president who financed the Florida and Alabama, the ships that terrorized Union merchants during the Civil War? No, it was George Trenholm, one of the most active members of the Charleston (SC) Chamber of Commerce. As president of the chamber, Trenholm had asked for a thorough federal charting of the waterways around the Charleston harbor. The survey provided valuable navigation information that became critical when Trenholm emerged a decade later not only as privateer king of the Confederacy but also as chief sponsor of blockade runners. (Some believe he was a model for Rhett Butler in Gone with the Wind.)

    But it wasn’t as if all chambers were Confederates. It was the New York Chamber of Commerce that furnished a cash reward of $25,000 to the captain and crew of the Kearsarge, which finally sank the Alabama.

    There have been other times when local chambers have performed roles worthy of national headlines. During Prohibition, a liquor wholesaler named Al Capone was seen as bad for business by the president of the Chicago Association of Commerce, Colonel Robert Isham Randolph. In an act of some courage, Randolph personally warned Capone and created a chamber subcommittee, popularly called the “Secret Six,” that engineered Capone’s downfall. The Six hired a consultant named Alexander Jamie to gather information, especially financial information, on Capone. Jamie brought in his brother-in-law, Eliot Ness, to help. Capone later credited the Secret Six with taking him down.

    Of course the local chambers have made their share of mistakes over the years. The St. Louis Chamber of Commerce once tried to stop the first railroad bridge across the Mississippi, but was stymied in court by the common sense and careful research of a folksy lawyer named Abraham Lincoln. And the New Orleans Chamber of Commerce successfully pushed for easing the quarantine regulations on ships in its harbor, after which a yellow fever-laden ship travelled up the Mississippi and nearly wiped out Memphis in 1878.

    But if you take some water and add a chamber, the result can be a megalopolis. Starting in 1840, the Houston Chamber with single-minded determination pushed for the removal of snags and mud from the Buffalo Bayou, which trickled on a circuitous 50-mile path to the sea. In the late 1800s, rain melted the salt on a barge on the bayou, and the Galveston News cackled that Houston finally had a salt-water port. But the laughing stopped on September 8, 1900, when a hurricane flattened Galveston.

    Houston overnight became a critical port for Texas, just in time for the Spindletop oil bonanza of January 10, 1901. The chamber would continue to push for improvements on what became the Houston Ship Channel, guaranteeing decades of future growth. Today, the chamber, now called the Greater Houston Partnership, is anticipating the shipping/economic impact of the opening of the second Panama Canal.

    Some national change in the country’s economic model has sprung directly from the actions of chambers. The Chicago Board of Trade, a chamber founded in 1848, revolutionized how its members bought and sold farm commodities, becoming so successful that by 1859 it essentially left the traditional chamber business. Instead, the Board of Trade continued to plow the virgin soil of this new financial field, inventing futures contracts and modern commodities trading.

    And so it goes. The Birmingham (AL) Chamber of Commerce belatedly, but successfully, broke the power of segregationist Bull Connor and promoted integration of the downtown, while the Atlanta Chamber of Commerce president negotiated the accord that, in a celebrated speech, Martin Luther King defended by saying, “If anyone breaks this contract, let it be the white man.” Segregation, especially racial conflict and the resulting negative publicity, was bad for business, and chambers took the side of peaceful integration in many (although not all) cities throughout the South.

    So much of what we think of as America was facilitated or aided by those often forgotten, always resourceful groups known as local chambers of commerce. Whether it’s the Golden Gate Bridge, Great Smoky Mountains National Park, the statue of Vulcan over Birmingham, commission and city manager forms of government, United Way-style giving, Baltimore’s Inner Harbor, and so much more – it was local chambers that led the way. The U.S. Chamber was fighting for business and free enterprise principles in Washington, but it was local chambers working “on the ground” that helped plant so many of these seeds across the nation.

    Each of the local chambers is vastly smaller than the U.S. Chamber, but collectively they have had a large impact. As in so many things, it has been the local organizations, not merely the national ones, that have shaped this country’s enterprise culture.

    Chris Mead is senior vice president of the American Chamber of Commerce Executives. He is working on a history of local chambers of commerce in the United States.

    Photo by Rob Shenk

  • California Suggests Suicide; Texas Asks: Can I Lend You a Knife?

    In the future, historians may likely mark the 2010 midterm elections as the end of the California era and the beginning of the Texas one. In one stunning stroke, amid a national conservative tide, California voters essentially ratified a political and regulatory regime that has left much of the state unemployed and many others looking for the exits.

    California has drifted far away from the place that John Gunther described in 1946 as “the most spectacular and most diversified American state … so ripe, golden.”  Instead of a role model, California  has become a cautionary tale of mismanagement of what by all rights should be the country’s most prosperous big state. Its poverty rate is at least two points above the national average; its unemployment rate nearly three points above the national average.  On Friday Gov. Arnold Schwarzenegger was forced yet again to call an emergency session in order to deal with the state’s enormous budget problems.

    This state of crisis is likely to become the norm for the Golden State. In contrast to other hard-hit states like Pennsylvania, Ohio and Nevada, which all opted for pro-business, fiscally responsible candidates, California voters decisively handed virtually total power to a motley coalition of Democratic-machine politicians, public employee unions, green activists and rent-seeking special interests.

    In the new year, the once and again Gov. Jerry Brown, who has some conservative fiscal instincts, will be hard-pressed to convince Democratic legislators who get much of their funding from public-sector unions to trim spending. Perhaps more troubling, Brown’s own extremism on climate change policy–backed by rent-seeking Silicon Valley investors with big bets on renewable fuels–virtually assures a further tightening of a regulatory regime that will slow an economic recovery in every industry from manufacturing and agriculture to home-building.

    Texas’ trajectory, however, looks quite the opposite. California was recently ranked by Chief Executive magazine as having the worst business climate in the nation, while Texas’ was considered the best. Both Democrats and Republicans in the Lone State State generally embrace the gospel of economic growth and limited public sector expenditure. The defeated Democratic candidate for governor, the brainy former Houston Mayor Bill White, enjoyed robust business support and was widely considered more competent than the easily re-elected incumbent Rick Perry, who sometimes sounds more like a neo-Confederate crank than a serious leader.

    To be sure, Texas has its problems: a growing budget deficit, the need to expand infrastructure to service its rapid population growth and the presence of a large contingent of undereducated and uninsured poor people. But even conceding these problems, the growing chasm between the two megastates is evident in the economic and demographic numbers. Over the past decade nearly 1.5 million more people left California than stayed; only New York State lost more. In contrast, Texas gained over 800,000 new migrants. In California, foreign immigration–the one bright spot in its demography–has slowed, while that to Texas has increased markedly over the decade.

    A vast difference in economic performance is driving the demographic shifts. Since 1998, California’s economy has not produced a single new net job, notes economist John Husing. Public employment has swelled, but private jobs have declined.  Critically, as Texas grew its middle-income jobs by 16%, one of the highest rates in the nation, California, at 2.1% growth, ranked near the bottom. In the year ending September, Texas accounted for roughly half of all the new jobs created in the country.

    Even more revealing is California’s diminishing preeminence in high-tech and science-based (or STEM–Science, Technology, Engineering and Mathematics) jobs. Over the past decade California’s supposed bulwark grew a mere 2%–less than half the national rate. In contrast, Texas’ tech-related employment surged 14%. Since 2002 the Lone Star state added 80,000 STEM jobs; California, a mere 17,000.

    Of course, California still possesses the nation’s largest concentrations of tech (Silicon Valley), entertainment (Hollywood) and trade (Port of Los Angeles-Long Beach). But these are all now declining. Silicon Valley’s Google era has produced lots of opportunities for investors and software mavens concentrated in affluent areas around Palo Alto, but virtually no new net jobs overall. Empty buildings and abandoned factories dot the Valley’s onetime industrial heartland around San Jose. Many of the Valley’s tech companies are expanding outside the state, largely to more business-friendly and affordable places like Salt Lake City, the Research Triangle region of North Carolina and Austin.

    Hollywood too is shifting frames, with more and more film production going to Michigan, New Mexico, New York and other states. In 2002, 82% of all film production took place in California–now it’s down to roughly 30%. And plans by Los Angeles County, the epicenter of the film industry, to double permit fees for film, television and commercial productions certainly won’t help.

    International trade, the third linchpin of the California economy, is also under assault. Tough environmental regulations and the anticipated widening in 2014 of the Panama Canal are emboldening competitors, particularly across the entire southern tier of the country, most notably in Houston. Mobile, Ala., Charleston, S.C., and Savannah, Ga., also have big plans to lure high-paid blue collar jobs away from California’s ports.

    Most worrisome of all, these telltale signs  palpable economic decline seem to escape most of the state’s top leaders. The newly minted Lieutenant Governor, San Francisco Mayor Gavin Newsom, insists “there’s nothing wrong with California” and claims other states “would love to have the problems of California.”

    But it’s not only the flaky Newsom who is out of sync with reality. Jerry Brown, a far savvier politician, maintains “green jobs,” up to 500,000 of them, will turn the state around. Theoretically, these jobs might make up for losses created by ever stronger controls on traditional productive businesses like agriculture, warehousing and manufacturing. But its highly unlikely.

    Construction will be particularly hard hit, since Brown also aims to force Californians, four-fifths of whom prefer single-family houses, into dense urban apartment districts. Over time, this approach will send home prices soaring and drive even more middle-class Californians to the exits.

    Ultimately the “green jobs” strategy, effective as a campaign plank, represents a cruel delusion. Given the likely direction of the new GOP-dominated House of Representatives in Washington, massive federal subsidies for the solar and wind industries, as well as such boondoggles as high-speed rail, are likely to be scaled back significantly.  Without subsidies, federal loans or draconian national regulations, many green-related ventures will cut as oppose to add jobs, as is already beginning to occur. The survivors, increasingly forced to compete on a market basis, will likely move to China, Arizona or even Texas, already the nation’s leader in wind energy production.

    Tom Hayden, a ’60s radical turned environmental zealot, admits that given the current national climate the only way California can maintain Brown’s “green vision” will be to impose “some combination of rate heights and tax revenues.”  Such an approach may help bail out green investors, but seems likely to drive even more businesses out of the state.

    California’s decline is particularly tragic, as it is unnecessary and largely unforced. The state still possesses the basic assets–energy, fertile land, remarkable entrepreneurial talent–to restore its luster. But given its current political trajectory, you can count on Texans, and others, to keep picking up both the state’s jobs and skilled workers. If California wishes to commit economic suicide, Texas and other competitors will gladly lend them a knife.


    This article 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. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Employment data from EMSI.

    Photo by {Guerrilla Futures | Jason Tester}

  • Building Sustainable Economies in West Africa – One Farmer at a Time

    Among farmers in western Africa, the passion for agriculture runs deep. Kwabena (Koby) Yeboah farms near the village of Gomoa Adumase about 45 minutes outside of Accra, Ghana in West Africa, driven by his focus and intent to succeed.

    Koby started farming five years ago at the age of 22. “I love the outdoors, working with my hands and making things grow,” he says.” I also enjoy hunting too, anything to be outside.” It’s a familiar refrain you’ll hear from almost any farmer you visit in North America. It’s all about the outdoors and a certain respect for the land. (Photo)

    Today he is working on bringing about 200 acres into production on his farm. Over the past five years Koby has built roads, cleared land, accessed water and prepared for production. With a number of full-time villagers who are on the farm every day caring for crops and land, he visits the farm about three days a week, but his mind is on the farm every day. He is anxious for the day when he can bring all of his 850 acres into production and be able to spend seven days a week on the farm. Until then he continues his role as an education consultant recruiting students to schools in Ghana in order to support his family, while spending as much time as he can feeding his passion for farming.

    Koby grows pineapple, maize, peppers, tomatoes and okra. In the near future he plans to add mushrooms, snail production, and has begun work developing a fish pond for Tilapia production. The diversification is impressive. He is also growing several different varieties of specialty potatoes in a custom greenhouse. His plans are to increase potato seed production for planting on his farm and to educate other farmers on growing these potatoes in hopes of expanding acreage around the region. He will seek and secure markets for the potatoes and work to build a reliable and effective means for the region to become a trusted supplier. It is upon the backs of individual farmers and small business operators that economic success will be built.

    Koby’s vision is to turn his farm into a key center of commerce for the village. When he puts out the call for harvest help 40 to 100 people arrive at his farm looking for work, forcing Koby to turn people away. But he has plans to grow and to create a solid source of continued employment for the villagers. His agriculture plan calls for planting dates staggered every six weeks, year round.

    The climate in the region is very steady and stable with consistent temperatures and consistent rainfall year round making it a perfect climate for staggered production. By creating a pattern where harvest and planting activities are happening every month of the year, he could employ farm help every month of the year. The impact of consistent, uninterrupted employment for the village would be an economic boon to the region, and Koby is well aware of this fact. He often speaks of one day being able to provide steady employment to the villagers.

    The villages in rural Ghana are agrarian in nature, mainly for subsistence but also for commercial gain. There is available land, potentially productive but largely untouched in this region. There are also many able hands available in the nearby villages looking for productive work, but too often idled by lack of need for their assistance. Koby Yeboah sees an opportunity to make a difference for the region by setting a strong example for others and helping fellow farmers succeed. It is a sense of honor and commitment not readily found among your average 27 year old, but certainly not lost on this man.

    An example of his commitment to the region, Koby has created a “model farm” just outside the village of Gomoa Adumase. Here on one acre of land he has tilled and prepared the soil and is demonstrating advanced farming practices for raising pineapple. He is teaching other farmers and villagers in the region about the new farming practices so they can learn and produce on their own, and doing it in an entirely hands-on environment. (Photo)

    The sense of community in the area is strong and Koby has grown to become an important part of it. Knowing that the villagers live on tight budgets he says, “I contribute all he can,” often purchasing school uniforms for a number of the children. But, the support doesn’t end there. Just outside the village lies the Gomoa Buduatta Orphanage, home to 16 beautiful young boys and girls who find a safe and secure place to live and go to school. Koby has taken on the incredibly honorable challenge of supporting the orphanage to the best of his ability. Again he says, “I contribute all I can” and you know that it is well appreciated.

    Upon visiting the orphanage the house mother greeted us and invited us in to the quaint accommodations. We visited for a few moments before she invited the children in to say hello. All 16 children came to the door, graciously removed their shoes and stepped inside. Tallest to the back, shortest to the front, nary a word said. As we engaged the children in conversation they were pleasant, extremely polite and often responded as a group in verbal unison. They were just wonderful children.

    We toured the facility to see the sleeping quarters for the 8 boys and the quarters for the 8 girls before stepping into the two small classrooms. It is a humble building, but you can see that to these children it is home and it is safe. Upon our departure all sixteen children in a melodic tone said, “Thank you Mr. Koby.” The whole experience was beyond impressive. (Photo)

    Returning from the tour of the farm, discussion turns to the fragile economy of Ghana and the poor condition of the infrastructure and road system. When asked about it Koby responds, “I live in my own economy. I don’t live in the economy of Ghana,” a stark statement that quiets discussion momentarily. He goes on to explain, “I have a plan and a program. I know what I need to do to succeed and that’s all I am focused on. I cannot worry about what I cannot control.”

    Koby Yeboah has a goal, a plan and is driven to succeed. He says, “I want to be the best farmer in Africa within 10 years.” And you know what? I believe he is just the man to do it.

    Dr. Colin N. Clarke is a senior strategist for AdFarm, a North American agriculture communications firm. AdFarm is a strategic partner of Praxis Strategy Group an economic development consultancy. Follow Dr. Clarke on Twitter @colinnclarke.

  • The Two Worlds of Buenos Aires

    Central Buenos Aires is undoubtedly one of the world’s great tourist destinations. Days could be spent walking among its narrow streets admiring the plentiful art noveau, art-deco, beaux-arts and other architectural styles. The triumphal Avenida 9 de Julio is one of the world’s widest boulevards with two interior roadways of up to seven lanes and two service roads of two lanes, with a Washington Monument type obelisk at Avenida Corrientes (Top photo). Avenida 9 de Julio is bordered by buildings that are both ordinary and impressive, such as the Colon Opera House.

    There is also an attractive area of redevelopment adjacent to the core in the former dock area, Puerto Madero. The old port buildings have been converted to commercial uses, especially restaurants. A number of high-rise condominium buildings have been constructed beyond the old port basins. Government buildings more than match the commercial architecture, with the National Congress and the Casa Rosada, or “Pink House,” with its balconies from which President Peron and his wife Eva used to address the public (Photo 2). Not more than two weeks ago, former President Nestor Kirchner lay in state to be visited by in an emotional outpouring by hundreds of thousands of Argentineans. The city of Buenos Aires also has a distinctive legislative building (Photo 3).

    These older romantic styles make Buenos Aires a wonderful walking environment. Most were erected in the first three decades of the 20th century. This was Buenos Aires at its zenith. Then, Buenos Aires was capital of one of the world’s acknowledged economic powers. Argentina generally ranked around10th in gross domestic product (GDP) per capita during that period (Note 1). Thus, today, the tourist can enjoy the product of that prosperous time.

    Economic Stagnation: More recent years have not been good to the Buenos Aires area and Argentina. The nation has seen decades of ups and downs – but mostly downs. The nation has been buffeted between constitutional governments and military dictatorships. Too often, even the constitutional governments have placed too little emphasis on creating wealth and too much on redistributing it. A failed currency policy in the 1990s destroyed the savings of millions. All of this has led to Argentina’s migration from the top 10 economies to near the bottom of the top 100, now ranked at 82nd in the world in GDP per capita. No top ten nation from early in the 20th century has fallen so far. New Zealand managed to drop from 1st in the world in 1920 to 51st now, but still has a GDP per capita double that of Argentina.

    Argentina suffered the largest sovereign debt default in world history, at $100 billion in 2002. The nation’s former colonial master, Spain, trailed Argentina in GDP per capita throughout the 20th century to the 1980s, yet is now more than twice as prosperous (Figure 1)

    This economic decline is not so evident in the autonomous city of Buenos Aires, which is also called Capital Federal, analogous to the District of Columbia (DC) in the United States. This is the Buenos Aires of tourists, an area only slightly larger than Washington, DC, but with five times the population. The municipality of Buenos Aires is by far the most affluent urbanization in the nation. Even so, there are informal settlements within the city, such as Villa 31. Overall, approximately three percent of the city’s population is in these kinds of informal settlements.
    BA3-bencich
    Population and Distribution: According to the last census (2001), the city of Buenos Aires had fewer people than in 1947, having fallen from 3.0 million residents to 2.8 million. The city is also very dense, at 35,600 persons per square mile (13,700 per square kilometer), which is about one-half the density of Manhattan or the ville de Paris and double the density of the city of San Francisco.

    Most of the population lives in peripheral areas. This dominant suburban growth pattern is typical of world urbanization, as can be seen in such high-income nation capitals as London, Washington, Brussels, Copenhagen has been in the suburbs. Indeed, all growth in Paris has been in the suburbs since 1881. Like the ville de Paris, the city of Buenos Aires now accounts for less than 25 percent of its metropolitan area population (Figure 2).

    Overall, the urban area (area of continuous development) has nearly 13 million people and covers more than 1,000 square miles (2,600 square kilometers) for a population density of 12,100 per square mile (4,700 per square kilometer). This is 70 percent more dense than Los Angeles and one-third more than Paris but less than one-eighth that of Dhaka (Bangladesh).

    Suburban Buenos Aires: The suburbs of Buenos Aires differ from those in high-income national capitals. Generally, the suburbs are far poorer than the city and reflect the more recently less affluent Argentina that has emerged in recent decades just as the central area testified to the nation’s former relative wealth. All of suburban Buenos Aires is in the adjacent Buenos Aires province, which has the largest population in the nation.

    Some of the suburbs are affluent, especially to the northwest, where suburban municipalities like Pilar and Tigre contain housing that could easily fit in upper middle income suburbs of the United States or Europe. However, even in these areas, there are close-by developments of low-quality and even informal housing, mostly housing domestic employees to the higher income population.

    The suburban poverty is far more pervasive to the southwest and the southeast. Many neighborhoods look similar to modest suburbs in Mexico City, though without the pervasive informal settlements. More people live in informal settlements in the suburbs than in the city, with estimates putting the number at above 500,000.

    More than the Core: Any thought, however, of Buenos Aires being a “compact city” is dispelled by the vast sea of lights visible on an evening flight out of Ezeiza International Airport. The urbanization stretches 30 to 40 miles in all possible directions, to the northwest, southwest and southeast (with the Rio de la Plata being to the northeast).

    However, probably no urban area illustrates the general rule that urban cores tend to be substantially different from their suburbs. Not only is suburban Buenos Aires far less dense, but it is far less affluent. Any who visits the city alone will have missed more than three-quarters of the reality.

    ————

    Note: GDP per Capita data based upon Angus Maddison’s work for the Organization for Economic Cooperation and Development.

    Photos (by the author):
    Top: Avenida 9 de Julio
    2: Casa Rosada
    3: City of Buenos Aires Legislative & Office Buildings
    4: Bencich Building
    5: Casa Borolo

    ————

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

  • Greetings From Recoveryland: Ten Places to Watch Coming Out of the Recession

    Like a massive tornado, the Great Recession up-ended the topography of America. But even as vast parts of the country were laid low, some cities withstood the storm and could emerge even stronger and shinier than before. So, where exactly are these Oz-like destinations along the road to recovery? If you said Kansas, you’re not far off. Try Oklahoma. Or Texas. Or Iowa. Not only did the economic twister of the last two years largely spare Tornado Alley, it actually may have helped improve the landscape.

    We have compiled a list of the 10 American cities best situated for the recovery. These are places where the jobs are plentiful, and the pay, given the lower cost of living, buys more than in bigger cities. In other words, places unlike much of the rest of the country. The cities, most of which lie in the red-state territory of America’s heartland, fall into three basic groups. There’s the Texaplex—Austin, Dallas, San Antonio, and Houston—which has become the No. 1 destination for job-seeking Americans, thanks to a hearty energy sector and a strong spirit of entrepreneurism. There are the New Silicon Valleys—Raleigh-Durham, N.C.; Salt Lake City; and urban northern Virginia—which offer high-paying high-tech jobs and housing prices well below those in coastal California. And then there are the Heartland Honeys—Oklahoma City, Indianapolis, and Des Moines, Iowa—which are enjoying a revival thanks to rising agricultural prices and a shift toward high-end industrial jobs.

    Unlike the Sun Belt states and cities along the East and West coasts, these locales not only grew during the boom of the mid-2000s, they suffered least in the Great Recession. The fact that they are mostly in red states should give the newly ascendant GOP comfort as it tries to deliver on its election-year promise to right the economy. That isn’t to say all the blue states will remain weather-beaten. Wall Street, heady with cheap money, has sparked a return to opulence. And the strong demand for high-tech products and services will likely keep places like Boston, San Francisco, and San Diego from devolving into fancy versions of Detroit. Yet given the results of last week’s election and the increasing odds against another bailout of state governments, the near-broke and highly regulated blue states will be hard-pressed to generate much new employment.

    Of course, not everyone living in our Top 10 cities has avoided the heartache. And the continued slow pace of the economic recovery could hamper expansion even in the most-favored cities. If energy tanks as a result of a renewed global slowdown, it could hurt Texas and Oklahoma; dropping agricultural prices would hit some of the Heartland Honeys hard. But relatively—and that is the operative word in this tough economy—our 10 cities should fare better than most anywhere in America. And they could offer us a road map for what the nation’s economy will look like once the dust settles.

    THE TEXAPLEX

    For sheer economic promise, no place beats Texas. Though the Lone Star State’s growth slowed during the recession, it didn’t suffer nearly as dramatically as the rest of the country. Businesses have been flocking to Texas for a generation, and that trend is unlikely to slow soon. Texas now has more Fortune 500 companies—58—than any other state, including longtime corporate powerhouse New York.

    Austin boasted the strongest job growth in our Top 10, both last year and over the decade. Home to the state capital and the ever-expanding University of Texas, the city is arguably the best-positioned of the nation’s emerging tech centers. It enjoys good private-sector growth, both from an expanding roster of homegrown firms and outside companies, including an increasing array of multinationals such as Samsung, Nokia, Siemens, and Fujitsu.

    Yet Austin’s newfound prosperity isn’t simply a product of its university culture or its synergetic collection of technology firms. Its success owes a great deal to simply being in Texas—a state itching to eclipse its historic archrival, the increasingly troubled California. Indeed, Texas is becoming to the Golden State what Arizona, Nevada, and Oregon were in the last decade: a refuge for workers and companies fed up with California’s high unemployment, cost of living, and dysfunctional state government.

    The Texas economy has benefited from widening diversification. Houston has a robust energy business and medical-services industry, and thriving international trade—all long-term growth areas. Dallas enjoys an expanding tech sector and well-developed business-service industries tied to a powerful corporate base. San Antonio has a strong military connection and an expanding manufacturing capacity, and it is a key locale for the growing Latino marketplace. What’s more, Texas offers pro-business policies and relatively low taxes, and the physical infrastructure in the cities is generally as good or better than in many East and West coast metropolitan areas.

    People are voting with their feet. All four Texas cities are enjoying strong immigration from the rest of the country and abroad. Houston and Dallas have higher rates of immigration than Chicago, and if the job picture stays the same, those cities could someday rival New York and Los Angeles in terms of ethnic diversity.

    THE NEW SILICON VALLEYS

    Although Massachusetts and California are lauded as the places “where the brains are,” neither ranked high in the growth of tech jobs over the past decade. More important is where the brains are headed.

    A lot of them are going to North Carolina, Virginia, and Utah. The population of Raleigh-Durham grew faster than any major U.S. metropolitan area during the recession, and the city ranked third on our list in terms of job growth over the last decade. To the north, in Virginia, lies another Silicon Valley wannabe, stretching across Alexandria, Arlington, and Fairfax counties. And then there’s Salt Lake City and its environs, buoyed by the arrival of such big names as Adobe, Twitter, and Electronic Arts. The Greater Salt Lake region, which follows the Wasatch Mountains from Provo to Ogden, has much to attract tech companies: short commutes, decent public schools, spectacular nearby recreation, and, perhaps most important, affordable housing. Roughly 75 percent of households in Salt Lake can afford a median-priced house, as compared with 45 percent in Silicon Valley and roughly half that in New York City and San Francisco. The cost advantages of cities like Salt Lake and the other high-tech hubs are expected to prove especially attractive to millennials—the generation born after 1982—as they begin forming families and buying homes en masse.

    None of these Silicon Valleys may ever reach the critical mass of the real thing in California, but they will become increasingly more effective competitors and take an expanding market share of the nation’s technology business.

    THE HEARTLAND HONEYS

    The oft-ignored center of the country boasts a thriving economy that seems poised for further expansion. The region is well positioned to take advantage of growing markets for agricultural commodities and farm machinery in fast-growing countries such as India and China. The Great Plains and parts of the southern Midwest have also attracted new investments in manufacturing, both from domestic and foreign firms.

    Having largely missed out on the housing bubble, the region also avoided the hangover. As a result, after watching generation after generation move away, several heartland cities are enjoying a noticeable uptick in domestic migration as well as immigration. During the Great Depression, it was Oklahomans who moved to California to escape the Dust Bowl. Now there are considerably more people moving from California to Oklahoma than the other way around.

    Indianapolis, once written off as “Indiana no-place,” is one emerging hotspot. The area’s housing affordability now stands at a remarkable 90-plus percent. Although the recession has hit some of Indiana’s manufacturing-oriented northwest corner, over the past decade Indianapolis’s population grew at a rate 50 percent greater than the national average, notes urban analyst Aaron Renn. Much of this success is due to an aggressively pro-business attitude that promotes growing clusters such as life sciences, motor sports, and Internet marketing.

    Oklahoma City and Des Moines have also enjoyed steady growth in both jobs and net migrants over the past decade. Des Moines was recently rated the No. 1 spot in the country for business and careers by Forbes magazine, thanks to a surging agricultural sector and strength in the business-services segment. And Oklahoma City—which enjoys low unemployment as a result of its steadily growing energy and aerospace sectors—has been ranked among the best job markets for young people, ahead of Dallas, Seattle, and even New York (having Kevin Durant lead the NBA’s Oklahoma City Thunder for the foreseeable future can only improve the buzz).

    Of course, none of the cities in our list competes right now with New York, Chicago, or L.A. in terms of art, culture, and urban amenities, which tend to get noticed by journalists and casual travelers. But once upon a time, all those great cities were also seen as cultural backwaters. And in the coming decades, as more people move in and open restaurants, museums, and sports arenas, who’s to say Oklahoma City can’t be Oz?

    Job Growth
    Net Domestic Migration
    Total 2010
    2009
     
    10yr
    7yr
    2yr
    1yr
    9yr
    6yr
    2yr
    1yr
    Emplymt
    Population
    Northern Virginia 13.8% 11.5% -1.0% 1.2% 12.3 3.2 10.1 8.3 1,309,675 2,558,256
    Raleigh 13.5% 13.7% -4.9% -0.4% 236.7 186.6 47.2 18.4 496,900 1,125,827
    Salt Lake City, Ogden, Provo 7.7% 8.5% -6.7% -1.4% 9.2 15.9 7.4 2.4 961,900 2,227,413
    Austin 14.1% 17.8% -0.9% 1.7% 177.2 136.5 37.3 15.5 768,500 1,705,075
    Dallas-Fort Worth 3.7% 8.1% -3.6% 0.8% 59.3 44.8 14.3 7.2 2,876,925 6,447,615
    Houston 11.7% 10.9% -3.6% -0.5% 51.2 42.9 15.5 8.7 2,518,675 5,867,489
    San Antonio 11.4% 10.8% -2.7% -0.2% 102.1 86.4 21.3 9.3 833,325 2,072,128
    Oklahoma City 4.9% 6.7% -2.2% 1.0% 37.8 32.7 11.6 7.3 561,125 1,227,278
    Des Moines 7.8% 7.4% -3.5% -0.9% 63.6 56.2 14.0 6.1 316,975 562,906
    Indianapolis 1.6% 0.3% -5.5% -0.3% 45.9 34.6 8.0 4.1 870,850 1,743,658
    New York -1.5% 0.3% -4.1% -0.5% -104.7 -82.6 -13.8 -5.8 8,288,300 19,069,796
    Los Angeles -6.2% -5.2% -8.0% -1.0% -107.9 -89.0 -15.7 -6.3 5,118,950 12,874,797
    San Francisco -13.1% -6.0% -8.9% -2.6% -83.1 -57.6 3.4 1.9 1,853,350 4,317,853
    Chicago -8.0% -4.8% -7.4% -1.7% -60.0 -45.8 -8.8 -4.2 4,235,175 9,580,567
    Nation -1.2% 0.4% -4.9% -0.1%   130,690,750  
    Areas are Metroplitan Statistical Areas
    Northern Virginia, Va. includes Arlington, Clarke, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania, Stafford, and Warren Counties and Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas, and Manassas Park Cities in Virginia.
    Salt Lake City region includes Ogden and Provo Metroplitan Statistical Areas
    Job growth uses May-August average for each year.
    Job data:  U.S. Bureau of Labor Statistics, Current Employment Survey
    Migration data:  U.S. Census Population Estimates.  Migration is cumulative over 10, 7, 2, or 1 yr period.  Number is rate per 1,000 residents in base year.

    —————-

    This article originally appeared in Newsweek.

    Praxis Strategy Group and Zina Klapper provided research for this article.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University and an adjunct fellow with 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: Jeanette Runyon

  • Currency Wars: The Yuan and The Dollar Face Off

    In the currency wars looming between the United States and China, everyone is focused on the decline of the U.S. dollar and the overvaluation of the Chinese renminbi. In the standoff, China maintains a low valuation for the yuan — the unit in which the renminbi is denominated — against the dollar, insuring that Wal-Mart can fill its aisles with goods that cost less than the patio furniture and video games made in Paducah, Kentucky.

    The Obama administration would like to “jawbone” the Chinese to relax its currency peg, so that the yuan appreciates, making it possible for Chinese consumers to buy goods from the United States. This monetary logic assumes that Chinese buyers want to own serialization rights to “The Apprentice”, or are shopping for B-1 bombers, as at the moment that may be what the U.S. economy primarily has to offer for export.

    In trying to explain the depth of the current U.S. recession, economists have latched onto the phrase “structural issues,” to indicate that the U.S. needs fewer pilates classes and more steel orders if it is to pay down its debts and create new jobs. The phrase itself is a hint that the currency wars have provoked bizarre east/west role reversals.

    While the mandarins of the Chinese politburo sound increasingly like hard-nosed American executives, the Obama administration is speaking a language that could well be lifted from Mao’s Little Red Book.

    Like the Cultural Revolution, the U.S. administration came to power pledging to get rid of the “four olds”: old thoughts, old culture, old customs, and old habits. It might well have denounced “Party formalism” or “spiritual pollution.” Yes, there would be struggle sessions and the opposition of turmoil elements. But the result of the reforms would be a Great Leap Forward, although one that evidently comes with the price tag of $2 trillion in annual deficits.

    China’s worry, meanwhile, is that its economy relies on one client with a receivable problem. Its treasury sits on $1 trillion of U.S. government bonds and securities, the peg to keep the yuan in line with the dollar, while the dollar is sinking under the weight of its GM shares, subprime loans, entitlement IOUs, and health care payouts.

    Twenty years ago it would have been a dream to imagine “capitalist roaders” running China. Now, we fear having to answer to repo men.

    Like any nervous creditor, the Chinese leadership focuses on “payout ratios,” “interest cover,” “debt-to-equity,” and “price-to-book.” Mao might have warned about “spontaneous tendencies toward capitalism,” but the new Chinese leadership thinks more about solvency and capital adequacy.

    Hence the current American hand–wringing at IMF meetings and the calls in Congress to convene what the Central Committee used to call “Grievance Redress Societies.”

    While the Chinese are working on Saturdays, the Obama administration’s jobs policy, for the moment, consists largely of hiring America’s unemployed into the Census Bureau. Maybe we can expect large posters of Uncle Sam exhorting Americans: “Do Your Economic Duty: Stand Up and Be Counted!”

    Why do Americans have trade and payment imbalances with China? The short (and nonacademic) answer might begin by saying that Americans are in love with such big box stores as Target and Costco, and can’t own enough sheets, towels, housewares, wrapping paper, sweatshirts, shoes, T-shirts, caps, kitchen appliances, televisions, recliners, electronics, iPhones, picture frames, blue jeans, and sneakers, all of which China is willing to supply at cut-rate prices.

    Consumerism in China is not the state religion that it is in the United States. Shoppers in the U.S. congregate in malls and stores that are the size of the Vatican, and they walk around in the same hushed raptures. The average shop in China, as best as I can tell from my travels there, is the size of a closet and sells bags of rice, bottled water, Hand of Buddha Tea, little pots, bird cages, and shoots of bamboo, none of which are made in those retooled New England woolen mills.

    China would buy our software, were it not already stealing it. As it is, all the Chinese want from the U.S. is a few buckets of KFC chicken, some coal plants, and the odd New York Yankees cap. Too bad they don’t want to buy AIG, the city of Las Vegas, or the Social Security system.

    Although the last thing I want to be accused of is “mountaintopism” or “right opportunism,” my fear is that the failure of the Obama administration’s currency pronouncements, combined with the rise of Tea Party nativism, will provoke the kind of protectionism that would warm the earmarks of Senator Smoot and Congressman Hawley.

    What could be easier than to impose tariffs on a variety of Chinese–made goods? The problem with protectionism is that it will further delay the economic recovery.

    In the short run, protectionism could redress the monthly U.S. trade imbalance (up to $28 billion a month with China), stimulate a few jobs, and end the “capitulationism” toward the subsidized state capitalism of the Far East.

    Longer term, protectionism puts the U.S. on a path in which its economy will be isolated from the rest of the world, with these (“renegade”) consequences: trade collapses, government debt remains high, foreign investors disappear, costs and inflation increase, unemployment goes up, savings go down, and “the carefree clique” in Washington raises taxes to pay for these “opportunist errors.”

    The currency disagreements mask the inherent imbalances in the global financial system: the West consumes too much and saves too little, and the developing world, and countries like China, spend too little and horde too much. Only economic expansion, debt reduction, and expanded trade can redress this so-called disequilibrium. Neither protectionism, nor more Fed magic will do the trick. Nor will declaring a currency war against China.

    Even the Chinese know that it’s better to be a dog in peace than a man in troubled times.

    Photo by Eric Mueller, “It’s Money, Comrade!”

    Matthew Stevenson is the author of Remembering the Twentieth Century Limited, winner of Foreword’s bronze award for best travel essays at this year’s BEA. He is also editor of Rules of the Game: The Best Sports Writing from Harper’s Magazine. He lives in Switzerland.