New Geography

Category: Economics

  • The Smackdown Of The Creative Class

    Two years ago I hailed Barack Obama’s election as “the triumph of the creative class.” Yesterday everything reversed, as middle-class Americans smacked down their putative new ruling class of highly educated urbanistas and college town denizens.

    More than anything, this election marked a shift in American class dynamics. In 2008 President Obama managed to win enough middle-class, suburban voters to win an impressive victory. This year, those same voters deserted, rejecting policies more geared to the “creative class” than mainstream America.

    A term coined by urban guru Richard Florida, “the creative class” also covers what David Brooks more cunningly calls “bourgeois bohemians”–socially liberal, well-educated, predominately white, upper middle-class voters. They are clustered largely in expensive urban centers, along the coasts, around universities and high-tech regions. To this base, Obama can add the welfare dependents, virtually all African-Americans, and the well-organized legions of public employees.

    These are the groups for whom Obama’s persona and policies pack the greatest appeal. Since Obama took office, the prime beneficiary of fiscal and monetary policies has been Wall Street, which has seen a nice 30% rise in the market and record bonuses. Large corporations, which are largely financed by stocks and bonds, have seen their profits soar over 40%, in part due to access to easy money.

    The financial boomlet is most marked in key creative class strongholds such as Manhattan, Boston and San Francisco, as well as their surrounding, super-affluent suburbs. The largesse benefits not only the traders, but the high-priced lawyers, accountants and publicists serving the financial elite. It has also benefited the high-end consumer industry, including the arts, which support much of the creative class. Not surpisingly, the Democrats scored well in these areas last night despite the GOP tide.

    The creative class also has benefited from the lavish expenditures of public funds to major universities for research. This has lifted the prospects of the professoriate at the elite colleges from which Obama takes much of his advice. Finally the administration has rewarded its friends and funders among Silicon Valley venture capitalists. Once self-described paragons of entrepreneurial risk-taking, they increasingly search out government incentives and subsidies to pay for their large bets on renewable energy technology.

    In contrast, the traditional middle class has not fared well at all. This group consists of virtually everyone who earns the national household median income of $50,000 or somewhat above. They tend to be white, concentrated outside the coasts (except along the Gulf), suburban and politically independent. In 2008 they divided their votes, allowing Obama, with his huge urban, minority and youth base, to win easily.

    Since Obama’s inauguration all the economic statistics vital to their lives–job creation, family income, housing prices–have been stagnant or negative. Not surprising then that suburbanites, small businesspeople and middle-income workers walked out on the Democrats last night. They did not do so because they loved the Republicans but because the majority either fears unemployment or already have lost their jobs. Many were employed in the industries such as manufacturing and construction hardest hit in the recession; it has not escaped their attention that Obama’s public-sector allies, paid with their taxes, have remained not only largely unscathed, but much better compensated.

    Of course, few on the progressive left–more expressive of a dictatorship of the professoriate than that of the proletariat–seem likely to confront these class realities. Many will ascribe last night’s disaster to the dunderheadness of the American people, or to the clever venality of the right. Certainly some tea party candidates, inexperienced and untested, did appear incapable of passing a high school civics test. But the results had less to do with Karl Rove’s money than the Democrats disconnect with the middle class.

    The real problem for the Democrats lies with fundamental demographics. The middle class is a huge proportion of the population. Thirty-five million households earn between $50,000 and $100,000 a year; close to another 15 million have incomes between $100,000 and $150,000. Together these households overwhelm the number of poor households as well as the highly affluent.

    In contrast, the “creative class” represents a relatively small grouping. Some define this group as upward of 40% of the workforce–largely by dint of having a four-year college degree–but this seems far too broad. The creative class is often seen as sharing the hip values of the Bobo crowd. Lumping an accountant with two kids in suburban Detroit or Atlanta with a childless SoHo graphic artist couple seems disingenuous at best. In reality the true creative class, notes demographer Bill Frey, may constitute no more than 5% of the total.

    At the same time, this affluent constituency may be more than offset by another more traditional upper class. This consists of people closely tied to such basic sectors as agriculture, fossil fuel production, suburban home-builders and the aerospace industry. These voters have, for the most part, remained solidly Republican for generations, and but many followed the “creative class” into the Democratic Party in 2006 and 2008. Last night this part of the upper class shifted back toward their political home.

    But the real decider–to use George W. Bush’s unfortunate phrase–remains the much larger, more amorphous middle class. Given the economy of the past two years, the subsequent alienation of this group should pose no mystery. Suburban swing voters didn’t suddenly turn into racists or right-wing cranks. Instead they have seen, correctly, that Obama’s economic policy has to date worked to the advantage of others far more than themselves or their families. Until the Democrats and Obama can prove that they once again can serve the interests of these voters, they will continue to struggle to recapture the optimism so appropriate two years ago.

    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 World Economic Forum

  • Prosperity Index Shows That Democracy Still Works Best

    With the Cold War well behind us, the real choice between systems lies in a growing variation in the form of capitalisms. Choices now range from the Chinese Leninist model – essential centrally planned exploitation of the greed gene – to various kleptocracies, divergent Anglo-American systems and varied forms of European capitalism.

    None of these systems are likely to excite the most rabid Hayekian, especially now that the once free market haven Hong Kong is being integrated into the Chinese command and control system. But still, according a new study by my colleagues at the Legatum Institute, when it comes to delivering the best economic environment for people and families various forms of liberal capitalism still perform best.

    The Legatum Prosperity Index found that all the more prosperous places – not only by income, but by quality of life, environment, education and health care – almost exclusively are democratic states. “Prosperity,” the report concludes, “is found in entrepreneurial democracies that have strong social fabrics.”

    This is a critical point given the current focus and admiration for the more centralized, state-controlled models emerging in places like Russia, China and Brazil. As an emerging country, China may enjoy the highest rate of growth but overall still does not provide most of its citizens anything close to what we might consider the “good life.” China, the Legatum study found, still lags behind in a host of factors besides democracy, ranging from poor health care and a degraded environment to an overweening state role in the private sector.

    In contrast, without exception, the most prosperous states are not so much the fastest-growing economies but those democracies that have been able adjust successfully to the emerging reality. At the top of the list are the northern democracies, led by Scandinavian countries Norway (#1), Denmark (#2), Finland (#3) and Sweden (#6). These are joined by other small, compact cold-weather states such as the Netherlands (#9) and Switzerland (#8). Rounding out the top 9 on the list are three resource-rich Anglo-American states, (#4) Australia, (#5) New Zealand and (#7) Canada.

    All these countries sell either resources – Norway, Australia and Canada – to emerging Asian super-powers or expertise and services. Most countries possess powerful niches that drive their economies and promote exports to developing countries. These include green technology (Denmark), motor vehicles, telecommunications, pharmaceuticals and forestry (Sweden), information technology (Finland), engineering and finance (Switzerland), business services , chemicals and plant science (Netherlands). The tiny Netherlands, for example, is China’s second largest European trading partner.

    The ability to shift gears also can be seen in Germany which improved its ranking to 15 due in part to rising industrial exports to emerging economies. Like the Scandinavian countries, Germany economy has also become significantly less regulated in the past decade. They are no longer the ultra generous social welfare states imagined by some liberals , but increasingly adapted to a tougher global marketplace.

    In this sense these northern states resemble the old Hanseatic trading cities of 13th century northern Europe, which created, in the words of historian Fernand Braudel, a “common civilization created by trading” from England to Russia. At its peak the League included dozens of cities across Northern Europe. Like the old Hansa, today’s version share largely Germanic or Nordic cultural roots, and have found their niche by selling high value goods, to distant burgeoning markets in Russia China, and India.

    This strong performance contrasts dramatically with the emergence of what might called ”a second Europe” made up of what I call the Olive Republics. These countries – Spain, Portugal, Italy, and Greece – remain functioning democracies but without the kind of effective governance found in their better managed, more fiscally responsible northern neighbors. These states have all fallen in over the past year in the Legatum rankings , falling into the 20s and even 30s – something very rare for long established European economies.

    Once again, the critical issue lies with adjustment. In contrast to the northern powers, the Olive Republics do not appear to be adjusting well to the general shift of global demand to the east. After all, besides a great history and culture, how much do these countries have to sell the Chinese, Indians and Brazilians ? Trips to Barcelona or expensive Italian food may be popular among the new rich of Shanghai or Singapore, but its Volvos, Mercedes, BMWs, not Fiats, that crowd the streets. In high tech, increasingly dominated by the U.S. and Asian countries like India and South Korea, the only big player along the Mediterranean is now greater Tel-Aviv.

    What about the other big Western democracies? Most rank between the ascendant Hansa and the depressed Olive Republics. The mega-giant of the liberal democracies, the U.S., ranks 10th, followed by the 13th ranked United Kingdom, 18th ranked Japan and 19th ranked France. All these countries retain strong technological prowess and entrepreneurial savvy, but have proven more adept at consuming goods and services from the rising Asian powers than selling to them. Governance, particularly fiscal management, also generally has been less impressive than among the Hansa states.

    But perhaps the best proof that democracy remains an economic asset can be found not in Europe or North America, but among the developing economies. China may dominate the world’s current trajectory through its huge population and expanding economy but its level of prosperity still lags that of democratic Australia and New Zealand. It also ranks well below demonstrably more democratic countries (albeit imperfectly liberal) like #17 Singapore, #22 Taiwan and #27 South Korea. These are emerging as the Hansa of Asia, selling high-technology products and services to the emerging Asian powers . If China ever could achieve some level of democratic governance say of South Korea, the world would need to really watch out.

    Similar patterns can be found across the rest of the developing world.In the Middle East, the relatively tolerant United Arab Emirates (#30) that leads the list. The only legitimate constitutional democracy in the region, Israel (#36), soars way ahead of repressive but oil-rich Saudi Arabia (#49) not to mention such stark autocracies as Syria (#83), Iran (#92) and Yemen (#105).

    In sub-Saharan Africa, democracies such as Botswana (#52) and (#66) South Africa generally lead the pack, while resource rich, but dictatorship ridden Zimbabwe ranks a meager 110. In Latin America, liberal democracies such as #28 Uruguay, #32 Chile and #33 Costa Rica sit on top while minerals rich but autocratic Venezuela (#75) and Bolivia (#82) sink closer to the bottom.

    Of course, it’s fashionable today in some circles to toast autocracy – particularly among our growing ranks of Sinophiles on both right and left. But the Legatum study suggests that democracy, not top-down dictatorship, remains the surest way to build a prosperous society. True, sometimes a dictatorship can spark faster growth in the short and even medium run but only democracies have proven capable of steering countries beyond rapid growth and into true, sustained prosperity. For this reason, democratic capitalist countries remain at the apex of the global economy outperforming challengers by the measure that most matters: delivering a secure, healthy and affluent life to the vast majority of their citizens.

    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 Rob Boudon

  • Green Jobs for Janitors: How Neoliberals and Green Keynesians Wrecked Obama’s Promise of a Clean Energy Economy

    In August 2008, then-candidate Barack Obama traveled to Lansing, Michigan, to lay out an ambitious ten-year plan for revitalizing, and fundamentally altering, the American economy. His administration, he vowed, would midwife new clean-energy industries, reduce dependence on foreign oil, and create five million green jobs. “Will America watch as the clean-energy jobs and industries of the future flourish in countries like Spain, Japan, or Germany?” Obama asked. “Or will we create them here, in the greatest country on earth, with the most talented, productive workers in the world?”

    Two years later, the answer to that second question appears to be no. Obama’s environmental agenda is in tatters. His green jobs plan has done little to make a dent in unemployment, which persists at close to 10 percent. Obama’s signature environmental initiative, cap-and-trade, died in the Senate in July. And, during the first year of Obama’s tenure, China massively outspent the United States on clean-energy technology.

    The story of how Obama’s green agenda came up empty is more complicated than the one conventionally told by Democrats and greens, who imagine that cap-and-trade would have been transformational had Republicans and global-warming deniers not gotten in the way. In truth, the president’s strategy was flawed from the start. Cap-and-trade would not have birthed a domestic clean-energy economy — indeed, it wasn’t designed to. Meanwhile, the administration’s green stimulus spending was split between short-term, if worthy, investments in green technology, to which far too little money was allocated, and over-hyped public-works projects that would never have delivered the new industrial economy Obama promised as a candidate.

    Voodoo Economics

    Shortly before the House passed its version of cap-and-trade legislation last year, the Center for American Progress (CAP), headed by Obama transition director John Podesta, released a study claiming that the cap-and-trade bill and the stimulus combined would create 1.7 million new jobs. Democrats repeatedly pointed to the CAP report to support their jobs claims. Extrapolating from the report’s analysis, it seems that over half of the new jobs, almost 900,000, were supposed to come from building retrofits. The study’s authors apparently believed that a mere $5 billion in stimulus funding for weatherization, plus a price on carbon, would leverage $80 billion annually in private investment and lead to the retrofitting of every single commercial and residential building in America in just ten years.

    Alongside the CAP report, the Natural Resources Defense Council and the leading green jobs group, Green For All, released another study written by two of the same authors, claiming that roughly half of the jobs would benefit low-wage workers and would offer “decent opportunities for promotions and rising wages over time.” Indeed, environmentalists such as Van Jones — who had come to prominence calling upon young people to “put down those handguns and pick up some caulking guns” and briefly served as Obama’s green jobs czar — claimed that building retrofits and cap-and-trade legislation could save both the planet and the inner city.

    In reality, the stimulus’s $5 billion weatherization program, according to the Department of Energy, created or saved just 13,000 jobs during the last reported quarter. But, even if more of these jobs had been created, the idea that inner-city youth should see what are essentially janitorial jobs as a pathway out of poverty was always far-fetched. America’s black middle class emerged from the steel, ship, and automobile factories of the postwar industrial heyday. Those jobs were high-skill, high-wage, and long-term. They manufactured products that could be sold on domestic and foreign markets, and they provided the economic basis for a dramatic improvement in black America’s standard of living. Jobs retrofitting buildings and weatherizing homes are, by contrast, low-skill and short-term.

    To be fair, Democrats in Congress and White House officials always believed that while the stimulus expenditures represented a down payment on the clean energy economy, the real action would ultimately be driven by private investments in response to cap and trade, not sustained public investments in innovation and manufacturing.

    In this way the green Keynesianism that characterized the stimulus comfortably accommodated itself to the neoliberal policy predilections that have, over the last 20 years, become Democratic Party orthodoxy. Born of fashionable neoclassical economic theory and political expediency after the Reagan revolution, Democratic neoliberalism embraces the notion that private firms are better and more efficient at “picking winners,” technological and otherwise, than government. This cliche was never based on the real-world history of technological innovation or economic growth but rather upon the neoclassical assumption that governments must do a worse job than private actors since they are not motivated by profit and cannot act rationally.

    Even Jones, who spent recent years railing against neoliberal economic policies, accepts this neoliberal conceit. “The real solution to this whole thing is to put a price on carbon,” Jones told Pacifica’s Democracy Now in the fall of 2008. “The biggest economic stimulus I can imagine would be a carbon tax or a cap and trade… so that suddenly there is a market signal for private capital to start moving aggressively in a clean energy, low carbon direction.”

    But cap and trade could never deliver the millions of new jobs that Obama, Congressional Democrats, and greens promised. The primary obstacle to private sector investment in clean energy technologies is not the absence of modest carbon price signals such as those in the Congress’ cap and trade proposals and currently in place in Europe. Rather, it is the vast price gap between fossil fuels and clean energy technologies. While fossil fuels are energy dense, widely available, easy to consume, and supported by a well-developed infrastructure, the alternatives are costly, cumbersome, intermittent, or all of the above.

    Yet cap and trade enjoyed mainstream credibility for as long as it did in spite of these hard technological realities because economic models seemed to show that a rising carbon price would cause technological innovation and hence emissions reductions. Cap and traders used these models to argue that once we have a carbon price, the market would magically deliver technology innovation because private firms would have an incentive to invest to make those technologies better and cheaper.

    But the magic wasn’t in the market, it was in the models constructed by neoclassical economists, which simply assume substantial rates of technological change. Innovation — non-linear, unpredictable, and ephemeral — is understandably difficult to model. Perhaps more significantly, important innovations have as often as not been the result of public investments in technology which economists, following neoclassical doctrine, are loathe to acknowledge, much less include in their models.

    The real world gives us ample reason to be skeptical of carbon pricing claims. The European Union has had a cap-and-trade system in place since 2005, and Norway and Sweden have had carbon taxes since the early ’90s. None have spurred much innovation. On the contrary, much of Europe has been on a coal-plant-building binge over the last decade. Where European nations have advanced clean-energy technologies–whether wind in Denmark, nuclear in France, or solar in Germany–they did so through direct investments in those technologies that dwarfed the economic incentive provided by carbon pricing.

    The Ideology of Decline

    In late May, President Obama told employees at a solar panel factory in California, “I’m not prepared to cede American leadership” in clean energy. But that is in effect what his policies have done. While U.S. policymakers have fetishized carbon pricing and energy efficiency retrofitting, America’s competitors have been investing heavily to deepen their domination of solar, wind, nuclear, electric car, and high-speed rail technology and manufacturing.

    China, Japan and Korea have moved forward with aggressive plans to out-manufacture, out-innovate, and out-compete the United States in clean tech. China alone plans to spend more than $740 billion (5 trillion yuan) over the next 10 years. While neoclassical economists and their disciples in Washington have presided over the deindustrialization and financialization of the American economy, our economic competitors have used long-term investments to establish dominant positions in advanced, high value manufacturing sectors such as automobiles, electronics, information technology, and now clean tech.

    Obama too could have focused on winning a similarly long-term commitment to public investment in green innovation and manufacturing. Instead, he threw his political capital behind cap-and-trade. Despite the fact that the rising domination of key clean energy technologies by our economic rivals could in no way be attributed to a price on carbon — China, Japan, and Korea don’t even have one — Obama, his Congressional allies, and their cheerleaders in the media such as New York Times columnist Thomas Friedman, have continued to insist that cap and trade legislation was the key to reestablishing U.S. competitiveness in clean tech.

    In truth, cap and trade was conceived as a strategy to minimize the cost of reducing emissions, not to create domestic industries or jobs. Indeed, economists typically argue that government should not even concern itself with such issues. To the neoclassical mind, making microchips is no better than making potato chips, as innovation expert Rob Atkinson wryly observes. If China is better at making solar panels and we are better at making foam insulation, then we should just buy our solar panels from China. From this point of view, creating low-skill construction jobs installing compact fluorescent light bulbs in old buildings has the same economic utility as creating high-skill jobs manufacturing solar panels and nuclear reactors for export.

    Apply these assumptions to climate and energy policy, and what you get is the failed Democratic agenda. Governments should cap carbon emissions and auction the right to pollute. Doing so would establish a price on carbon pollution that will make fossil fuels increasingly expensive and thus drive private investment and consumption to efficiency and renewables. If all those solar panels and windmills get made in China — so be it. America will still lead the world in potato chips or something else.

    This is not a recipe for American economic competitiveness in clean energy technology and manufacturing. America’s nascent clean energy industries need sustained public investments to survive and prosper. While neoliberal greens and their allies were hyperventilating over the death of cap and trade, the stimulus investments in technology and manufacturing were hard at work laying the foundations for a competitive clean economy. Though overshadowed by the public works-style efficiency programs, stimulus-funded investments in clean technology arguably saved the American renewables industry, which was in free-fall after the 2008 financial crisis.

    In contrast to the green public works projects, stimulus investments in manufacturing and innovation have largely done what they were intended to do — support an embryonic domestic industry and help improve clean energy technologies so that they can become competitive with fossil fuels. Those investments helped put American clean energy manufacturing back on a competitive footing globally, and, ironically, created more jobs at less cost than the green public works investments that were supposed to put millions of Americans back to work. Already, Deutsche Bank estimates that the stimulus grew U.S. battery manufacturers production capacity from two percent of the global market to 20 percent by 2012, and the story is similar for other technologies.

    Those technologies still have a long way to go before they will be good enough and cheap enough to become the basis for a sustained American economic renewal. But the road map for getting there looks a lot more like what America began through the stimulus investments in technology and manufacturing than through the green public works programs and carbon market making that have distracted the Administration and Congress for the better part of the last two years.

    This should not particularly surprise us as the history of industrialization and technology innovation in America is the history of government investment in technology. In the postwar era, the federal government made investments in the development and commercialization of new technologies such as nuclear power, computers, the Internet, biomedical research, jet turbines, solar power, wind power and countless other technologies at a scale that private firms simply could not have replicated. Those investments “crowded in” rather than crowded out private investment and the result was high growth and prosperity that benefited virtually every American.

    Unfortunately, neither Obama nor his fellow Democrats still seem to get it. While White House officials, in the wake of the collapse of cap and trade, tout the impressive short-term accomplishments of the stimulus investments in technology and manufacturing, they have done little to date to prevent them from expiring next year.

    Change We Can Believe In

    Obama appears genuinely moved by the vision of a clean-energy economy. He seems to have convinced himself, however, that America’s energy economy can be transformed through carbon markets and efficiency retrofits.

    The president’s proposal to “make clean energy the profitable kind of energy” — which was always code for making fossil fuels more expensive — today needs to be replaced by a focused effort to make clean energy cheap through innovation. Doing so will require large, direct, and sustained federal investments in new energy technologies. This focus on innovation may seem like an indirect way to create jobs, but history shows it is also the one with the strongest record of producing whole new industries — industries that have driven America’s long-term economic expansion.

    There is a growing consensus in favor of such an effort, which includes some conservatives and Republicans who opposed cap-and-trade. Support for greater investment in energy innovation includes corporate chieftains, such as Bill Gates, GE’s Jeff Immelt, and Intel founder Andy Grove, as well as dozens of Nobel laureate scientists and energy policy experts across the ideological spectrum.

    The failure of cap-and-trade to make it through the Senate may thus turn out to be a blessing in disguise. It spares the country a program that would have done little to help either the economy or the environment. And it gives Obama and the Democrats an opportunity to reconsider how they might build the clean-energy economy they were elected to deliver. With the right policies, the answer to the question Obama posed two years ago in Lansing — will the United States lead the way in creating clean-energy jobs? — can still be yes.

    This piece originally appeared at Breakthrough Blog.

    Michael Shellenberger and Ted Nordhaus are co-founders of the Breakthrough Institute and authors of Break Through.

    Image by heatingoil

  • The Future of a Hub: Can Singapore Stay On Top of the Game?

    Viewed from a broad, historical perspective, Singapore’s position as a hub is far from inevitable or unassailable. History shows that hubs come and go. Malacca used to be the centre of the spice trade in Southeast Asia. Venice was the centre of East-West trade throughout the Middle Ages. Rangoon, now Yangon, was the aviation hub of Southeast Asia before 1962.

    Is Singapore in danger of also ceding its hub status as a result of forces beyond our control? The case of Malacca is instructive. By the 16th Century, the city on the Malay peninsula had become the most important port in Southeast Asia. It served as the bridge between the spice-producing islands of Southeast Asia and the markets in Europe and Asia. Malacca became so integral to East-West trade that a Portuguese traveller and writer, Tome Pires, proclaimed that “who is Lord of Malacca has his hand on the throat of Venice”.

    Malacca was a forerunner of the free port that Singapore was to become. It welcomed foreign merchants as well as their trade. But after the Portuguese conquest of the city in 1511, it declined as the spice hub of the region, as the Portuguese – and later the Dutch – sought to achieve monopolistic control of the spice trade. Fierce competition from neighbouring ports such as Johor meant that traders had other options. The city soon declined and today is best known as a tourist attraction.

    Half a world away from Malacca, Venice emerged as the European hub of the global trading network. For nine hundred years, Venice was a flourishing centre of trade between Europe and Asia, especially in silk, grain and spices. Geography played an important role in Venice’s rise. Its relative isolation from the mainland insulated it from the confusing and often deadly politics of the Italian states.

    Venice concentrated its resources and energies on advancing its commercial interests in distant regions. By the 13th century, Venice was the second largest city in Europe after Paris, and its most prosperous. It linked the main trade routes between Europe and Asia.

    But eventually Venice also declined. The fall of Constantinople to the Ottomans in 1453 disrupted the traditional overland trade route from Europe to Asia, forcing Europe to find alternative trade routes to the East. At the turn of the 16th century, Portugal’s discovery of a sea route to the East Indies undermined Venice’s monopoly. New ports emerged to become Europe’s main intermediaries in the trade with the East, striking at the very foundation of Venice’s wealth. With its centrality as a commercial hub broken, Venice declined and eventually fell to the Austrians in 1797.

    The Theory of Hubs

    Malacca and Venice are both examples of hubs in that first flourished and then declined as trade routes and technologies changed. Simply defined, hubs are the exceptionally well-linked nodes in a network. Malacca and Venice exploited their commanding positions in the main trade networks of their times. They consolidated their hub positions by astute diplomacy, openness to talent from elsewhere, and broadening the range of their activities beyond just trade.

    Throughout history, hubs have been the main engines of economic growth and development. Network theory provides us with insights to explain why hubs acquire wealth more easily than other nodes in a network. Today, as in the past, the world’s economic geography remains dominated by hubs which are the focal points of opportunity, growth and innovation. Firms locate where skills, capabilities and markets cluster.

    A recent study identified the existence of 40 mega-regions worldwide. They are defined as places that claim large populations, large markets, significant economic capacity, substantial innovative activity, and highly skilled talent. Many of these 40 mega-regions are formed by hub cities growing outward and into one another. Singapore is one of these hubs.

    Today, of course, air transport plays a critical role in establishing hubs. Air hubs make previously unlinked cities accessible to one another in just one or two links. Singapore is classified as a “connector” hub – it is a hub within the East Asian/Southeast Asian region, with a high number of links to cities in other regions. So in 2007, while Changi Airport was ranked 19th by the Airports Council International in terms of passenger numbers, it was ranked 6th if only international passengers are considered.

    If Singapore is a central node connecting different regions, what might undermine this position? Challenges could come from two directions. The first is competitors in the region, such as Kuala Lumpur, Bangkok and Hong Kong, as well as those from other regions, such as Dubai. Dubai is the largest aviation hub in the Middle East and is a fierce competitor for the Australia-Europe traffic. Another challenge is from long-haul flights. The same technology that allows Singapore Airlines to bypass Tokyo on flights to Los Angeles could one day allow Emirates to fly non-stop from Dubai to Sydney, and Qantas or British Airways to fly non-stop along the “kangaroo route” from London to Sydney.

    The more cities move away from the hub-and-spoke model of air transportation to point-to-point transportation, the more difficult it will be for Singapore to retain its status as an aviation hub. This is conceptually no different from Venice losing its hub status because alternative and more direct trade routes were found between markets in Europe and spice producers in the East.

    This threat underlines the importance of constantly re-inventing Singapore as a hub. It would be fatal to assume that the density of connections that we have today and the centrality that we enjoy in today’s networks – whether in air transportation, maritime, or other networks – are permanent. New technologies might create new networks with their own hubs and connectors. Whether we will continue to be a hub in the networks that emerge will depend on our capabilities, on our ability to seize early mover advantages, and on how quickly the new networks emerge.

    I think it is possible to distil five factors that determine the success and sustainability of hubs like Singapore.

    1. Establish your role early. Singapore built the first container port in the region. This gave us first-mover advantage. We exploited it, and Singapore was propelled to the front rank of global container ports.
    2. Ensure open access and maximum connectivity. Singapore under the British thrived because of its status as a free port. In contrast places like Jakarta languished under the Dutch policy of controlling and taxing trade. Being well-connected and plugged into dense networks confer far more advantage than efforts to monopolise production or to control access to resources.
    3. Capitalise on and exploit small initial advantages. The research on networks suggests that the economic development process is highly path-dependent: the choices we face today are largely shaped by the choices we made in the past and the capabilities that we have already built up. Singapore was able to become a leading petrochemicals hub because we were able to build on our early success in attracting oil refinery activities.
    4. Constantly re-invent and diversify the hub’s value proposition. In Singapore’s context, our status as a maritime hub gives us the opportunity to develop strengths in new areas that go beyond our traditional role as a port. These include ship financing, ship insurance and various ancillary activities that the shipping industry depends on. This diversification will also give us greater resilience in the face of uncertainties and rapid changes in the maritime industry.
    5. We need a strong sense of belonging. If people only see Singapore as “Hotel Singapore”, then when there is an economic downturn or other problems, they will move to where the opportunities are greater. The challenge is to maintain a core that will sustain the hub through economic cycles.

    Singapore’s continued success as a hub depends both on its connections to the world, as well as connections to its citizens wherever they may now live. Our strategic response to the limitations of our physical size must be to strengthen our hub position by boosting not only its physical connections to networks, but also in other domains – an R&D hub, an intellectual hub, and even a cultural and entertainment hub.

    To avoid the fate of Malacca or Venice, we must re-invent and re-position ourselves and stay ahead of the competition. This is the imperative that will determine our future as a city-state, as both a place and a nation.

    Peter Ho is Senior Advisor to Singapore’s Centre for Strategic Futures. Before retirement, he was the Head of Civil Service in the Singapore Government.

    Photo by Storm Crypt

  • North America’s Fastest-Growing Cities

    The U.S. and Canada’s emerging cities are not experiencing the kind of super-charged growth one sees in urban areas of the developing world, notably China and India. But unlike Europe, this huge land mass’ population is slated to expand by well over 100 million people by 2050, driven in large part by continued immigration.

    In the course of the next 40 years, the biggest gainers won’t be behemoths like New York, Chicago, Toronto and Los Angeles, but less populous, easier-to-manage cities that are both affordable and economically vibrant.

    Americans may not be headed to small towns or back to the farms, but they are migrating to smaller cities. Over the past decade, the biggest migration of Americans has been to cities with between 100,000 and 1 million residents. In contrast, notes demographer Wendell Cox, regions with more than 10 million residents suffered a 10% rate of net outmigration, and those between 5 million and 10 million lost a net 2.4%.

    In North America it’s all about expanding options. A half-century ago, the bright and ambitious had relatively few choices: Toronto and Montreal for Canadians or New York, Chicago or Los Angeles for Americans. In the 1990s a series of other, fast-growing cities–San Jose, Calif.; Miami; San Diego; Houston; Dallas-Fort Worth, Texas; and Phoenix–emerged with the capacity to accommodate national and even global businesses.

    Now several relatively small-scale urban regions are reaching the big leagues. These include at least two cities in Texas: Austin and San Antonio. Economic vibrancy and growing populations drive these cities, which ranked first and second, respectively, among large cities on Our “Best Places For Jobs” list.

    Austin and San Antonio are increasingly attractive to both companies and skilled workers seeking opportunity in a lower-cost, high-growth environment. Much the same can be said about the Raleigh-Durham area of North Carolina, and Salt Lake City, two other U.S. cities that have been growing rapidly and enjoy excellent prospects.

    One key advantage for these areas is housing prices. Even after the real estate bust, according to the National Association of Homebuilders, barely one-third of median-income households in Los Angeles can afford to own a median-priced home; in New York only one-fourth can. In the four American cities on our list, between two-thirds and four-fifths of the median-income households can afford the American Dream.

    Advocates of dense megacities often point out that many poorer places, including old Rust Belt cities, enjoy high levels of affordability, while more prosperous regions, such as New York, do not. But lack of affordability itself is a problem; areas with the lowest affordability, including New York, also have suffered from high rates of domestic outmigration. The true success formula for a dynamic region mixes affordability with a growing economy.

    Our future cities also are often easier for workers and entrepreneurs alike. Despite the presence of the nation’s best-developed mass transit systems, the longest commutes can be found in the New York area; the worst are for people living in the boroughs of Queens and Staten Island. As a general rule, commuting times tend to be longer than average in some other biggest cities, including Chicago and Washington.

    In contrast, the average commutes in places like Raleigh or San Antonio are as little as 22 minutes on average–roughly one-third of the biggest-city commutes. Figure over a year, and moving to these smaller cities can add 120 hours or more a year for the average commuter to do productive work or spend time with the family.

    Similar dynamics–convenience, less congestion, rapid job growth and affordability–also are at work in Canada, where two cities, Ottawa (which stretches from Ontario into Quebec) and Calgary, stand out with the best prospects. Many Canadians, particularly from Vancouver, would dispute this assertion. But Vancouver, the beloved poster child of urban planners, also suffers extraordinarily high housing prices–by some measurements the highest in the English-speaking world. This can be traced in part to the presence of buyers from other parts of Canada and abroad, particularly from East Asia, but also to land-use controls that keep suburban properties off the market.

    Calgary, located on the Canadian plains, not much more than an hour from the Rockies, retains plenty of room to grow, and its housing price-to-income ratio is roughly half that of Vancouver’s. Calgary is also the center of the country’s powerful energy industry, which seems likely to expand during the next few decades, and its future is largely assured by soaring demand from China and other developing countries.

    The other Canadian candidate, the capital city of Ottawa and its surrounding region, has developed a strong high-tech sector to go along with steady government employment. Remy Tremblay, a professor at the University of Quebec at Montreal, notes that Ottawa “is changing very rapidly” from a mere administrative center to a high-tech hotshot. Yet for all its growth, it remains remarkably affordable in comparison with rival Toronto, not to mention Vancouver.

    In developing this list we have focused on many criteria–affordability, ease of transport and doing business–that are often ignored on present and future “best places” lists. Yet ultimately it is these often mundane things, not grandiose projects or hyped revivals of small downtown districts, that drive talented people and companies to emerging places.

    Raleigh Durham, N.C.

    Even in hard times this low-density, wide-ranging urban area has repeatedly performed well on Forbes’ list of the best cities for jobs. The area is a magnet for technology firms fleeing the more expensive, congested and highly regulated northeast corridor. One big problem obstructing the region’s ascendancy has been air connections. But Delta recently announced a large-scale expansion of flights there from around the country. Population growth will likely be lead by educated millennials seeking affordable housing and employment opportunities. Today the region has 1.7 million residents; the State of North Carolina projects it will grow to 2.4 million by 2025.

    Austin, Texas

    Austonites tend to be smug, but they have good reason. The central Texas city ranked as the No. 1 large urban area for jobs in our last Forbes survey. Along with Raleigh-Durham, Austin is an emerging challenger for high-tech supremacy with Silicon Valley. The current area’s population is 1.7 million and is expected to grow rapidly in the coming decades. Austin owes much both to its public sector institutions (the state government and the main Campus of the University of Texas) and its expanding ranks of private companies–including foreign ones–swarming into the city’s surrounding suburban belt.

    Salt Lake City, Utah

    Once seen as a Mormon enclave, the greater Salt Lake urban area–with roughly 1 million people–has every sign of emerging as a major world player with a wider appeal. The church still plays a critical role, in part by financing a massive redevelopment of the city’s now rather dowdy city core. The area’s population has doubled since the early 1970s and will grow another 100,000 by 2025 to well over 1.1 million. New companies are flocking to this business-friendly region, particularly from self-imploding California. Increasing national and global connections through Delta’s hub will tie this once isolated city closer with the wider world economy.

    Calgary, Alberta, Canada

    You don’t have to buy the notion of a climate-change-driven northern ascendancy to see a bright future for Alberta’s premier city. Calgary is positioned well on the fringe of Canada’s largest energy belt and enjoys lower taxes and less stringent regulations than its Canadian rivals. Calgary has been hit by a slowdown in energy business, but over time demand from China, India and a slowly recovering world economy should boost this critical sector. The region is expected to be back to its familiar place on top among Canadian urban economies by next year.

    San Antonio, Texas

    Last year this historic Texas metropolis–home to the Alamo–ranked second on our list “best cities for jobs” among larger cities. The region has been growing rapidly to well over 2.1 million. As the economy, particularly in Texas, recovers, an already strong health care sector will be joined by an expanding industrial base. One key factor in San Antonio’s favor: stable house prices–even by Texas standards. PMI Mortgage Insurance Co.’s most recent risk index, which is a two-year measure, lists San Antonio as having the lowest risk from falling prices among large Texas cities.

    Ottawa, Ontario-Quebec

    Canada’s capital region, which extends across the border to Gatineau, in Quebec, has grown to over 1.2 million. This growth has come in large part from government–which may slow after the end of Canada’s stimulus–but also a vibrant private sector. Ottawa boasts a pleasant quality of life and is one of Canada’s most affordable big cities. The population, notes the University of Quebec’s Remy Tremblay, is the “most educated, with the highest disposable income, of all Canadian cities.” Ottawa airport, Tremblay adds, is experiencing the fastest traffic growth of virtually any in Canada.

    Oklahoma City, Okla.

    Oklahoma City–with its business-friendly environment and abundant oil and natural gas reserves–ranked No. 11 in Forbes’ list of the best big cities for jobs. A KPMG study named it the least costly metro area to do business among U.S. cities with populations between 1 million and 2 million, and according to the Census Bureau Community Survey, it has the third-shortest commute time among the 52 largest cities. Such factors–plus its exciting new basketball star, Kevin Durant–have definitely attracted plenty of new residents. An article in the Sacramento Bee reported that many Californians were migrating to the former Dust Bowl town in search of jobs and more stable housing prices, and its population, at 1.2 million, is expected to grow 9.8% in the next 10 years, according to the Greater Oklahoma City Partnership.

    Omaha, Neb.

    The Omaha metro area has a population of 838,875, making it the 60th largest metropolitan area in the country. And it’s growing, thanks to high in-migration and a recent baby boom that added about 4,600 children between 2008 and 2009. The population has grown 9.4% to from 2000 to 2009, and it is expected to grow another 2.3% by 2014. Why are so many people flocking to Omaha? One reason is the low cost of living, including stable housing prices (like many of the Great Plains cities). Another reason: jobs. Omaha ranked ninth in our most recent best big cities for job list, with its healthy agriculture and civil engineering industries. Its friendly attitude toward business and innovation–as well as the strong universities in the area–has made it a leader in biotechnology. More than 20 bioscience companies are headquartered there–including Streck Laboratories and ConAgra Foods.

    Northern Virginia

    Formerly considered a suburb of Washington, D.C., Northern Virginia–which comprises Arlington, Fairfax, Loudon and Prince William counties, as well as other independent cities–has become a metro area of its own. The expanding federal government no doubt plays a large part in the area’s growth; the CIA and the Department of Defense are headquartered there, and it is home to many other government agencies. The area also has one of the largest technology industries outside Silicon Valley. Northern Virginia has one of the most affluent, as well as the most educated, populations in the country; an astonishing 35% of Arlington County’s population, for example, holds a graduate or professional degree.

    Nashville, Tenn.

    A high quality of life, a vibrant cultural and music scene and a diverse population make Nashville a desirable place to live. The Nashville Area Metropolitan Planning Organization expects the 10-county greater Nashville area, home to 1.3 million people, to add close to another million by the year 2035. Low housing costs contribute to a cost of living that is lower than other affordable cities, like Raleigh, Austin, Dallas or Indianapolis. Nashville is also home to a growing health care industry: More than 250 health care companies have operations in Nashville, and 56 are headquartered there.

    Columbus, Ohio

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

    Indianapolis, Ind.

    Thanks to a business-friendly attitude, inexpensive housing and a strong cultural community, Indianopolis’ population–now at 1.7 million–has increased at a rate that is 50% higher than the national average. That’s faster than hot spots Washington, D.C., and Seattle, and nearly as fast as urban-planner darlings Portland or Denver. But while Portland and Denver may attract more young singles, Indianapolis boasts a growing population of educated, young married couples–many coming from cities like Chicago for the shorter commutes and lower cost of living–an arguably more attractive demographic since they will most likely stay, raise families and invest in the communities, boosting the area’s growth even more.

    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 branewphoto

  • Cruising Into Student Debt

    I once calculated that, for the cost of four years of education at a private American university, a student could take 105 cruises around the world. For the comparison, I chose only cruises that cost about $1,900, as who wants to go through college stuck with an inside cabin? As I imagine it, Cruise College (school motto: “Go Overboard on Learning”) even has some similarities to the landlocked undergraduate experience.
    For all I know it may exist, given that higher education is one of the few growth sectors in the U.S. economy.

    Despite the decline of American business, private colleges, state universities, night schools, and for-profit continuing education have boomed.

    Harvard College will get about 30,000 applications for the 1,700 places in next year’s freshman class. At the same time, there’s a strong demand for education at community colleges in economically depressed places, as laid–off workers retool for new jobs.

    Beyond colleges with bricks and mortar boards, there is also the flourishing world of online universities, which flash their pop–up banners each time you log onto the Internet. (“Welcome to Faber College: Knowledge is Good.”)

    “For profit universities” offer master’s in business administration or degrees in philosophy in exchange for computer clicks and (prepaid) tuition. But you don’t need an online degree from Ace’s Accounting and Appraisal Academy to understand that there are hidden costs.

    For years one of the hottest stocks on Wall Street has been Apollo Group, Inc., an education corporation that markets its degree under the flagship of the University of Phoenix.

    Its campuses (not to mention leafy computer servers, for online students) are spread across the country and operate in forty states. Among other theorems, Phoenix postulated that continuing educators like their “campus” to be near Interstate exits, and that students usually only will drive twenty minutes to attend class. (It was Mark Twain who said, “Never let college get in the way of the evening commute.”)

    Apollo’s stock went public in the 1990s, and reached a pre-crash high of $91 a share, before Wall Street reduced its grade to about $50. Still, it’s a billion dollar company with strong growth, and the University of Phoenix is larger than nearly all state universities, not to mention the Ivy League, with some 470,000 enrolled students.

    Faithful to its name, Phoenix believes in the redemption of the American spirit, and it attracts its students with the promise that more degrees will lead them out of their doldrums. Courses are practical, borrowing from the school of knocks.

    To “take this job and shove it,” Americans need new skills — as nurses, IT programmers, whatever — and Phoenix (“the drive-thru university”) markets classes at convenient times and places.

    The reality of online education, however, is more subtle, as students are not the instruments of a new enlightenment so much as the pipeline of subprime student debt. They are recruited not for their mastery in art or football, but for their ability to fill out bank forms that let Phoenix, like any for-profit school, tap into the vast subsidized gold mine of federal student loan programs.

    Imagine, one day, stickers on the back of their Volvos that read “Subprime State.”

    For-profit university cheerleaders and even the federal government often brag about the low default rates on student loans. The reason the loans stay current, long after students have flunked out of astrology, is because it’s impossible to walk away from the tuition bills.

    Neither a bankruptcy nor an incomplete allows a student an escape from lenders intent on debt collections. (John Blutarksy: “Christ. Seven years of college down the drain.”) Better yet, the ultimate guarantor of the loans is the U.S. government. Knowledge may be Good, but government-backed debt is better.

    According to the New York Times, the default rate on student loans was about 7 percent in 2008, the most recent year for which data are available; “In the 2008-9 award year, students at for-profit schools represented 26 percent of borrowers — but 43 percent of defaulters. The median federal loan debt for students earning associate degrees at for-profit institutions was $14,000.”

    There is an online Student Loan Debt Clock, which reports outstandings of $855 billion, more than the credit card debt in the United States. It goes up about $3,000 a second, which is 5,684 luxury cruises an hour.

    It could be argued that traditional universities have similar Faustian (he coached at Notre Dame) bargains with their students. In exchange for about $200,000, which funds all sorts of professorial sabbaticals and vague courses (“Proust, Prufrock, and Pederasty”), students get undergraduate degrees that can be redeemed for yet more study at the graduate level… should they want to find interesting jobs.

    Statistically, an undergraduate degree provides, on average, $50,000 more per year in salary than does a high school diploma, although it is about a wash, were you to invest the tuition money into an S&P stock fund. Engineers are paid more than poets; state universities offer better “returns” than private colleges. It’s hard to date a cheerleader at an online university.

    Is Cruise College a better deal than the great American undergraduate experience? I can only speak from personal experience, which is limited. I have only gone on one cruise, while I spent six years in the waters of American and European universities. My quick take: The cruise had better floor shows, but I preferred the college library. The food was about the same. Overall, it would be hard to distinguish those who were drunk at fraternity parties from those merely seasick on board.

    And at least the students at Cruise College, for their job networking practicum, can mix with retired American executives.

    Because I am a child of mid-century suburbia, I believe in the good of a college education. On the walls of my childhood room were the pennants of various schools, and we covered our grammar school books with the names of great universities. In high school, we laughed at the Woody Allen line: “I was thrown out of there during my freshman year, for cheating on my metaphysics final. You know, I looked within the soul of the boy sitting next to me.”

    I loved a lot about my university experiences — the seminars, my friends, and something the cafeteria staff called “Chicken Eugène.” Still, I have no doubt that learning has many paths and that, for some, cruising would work as well as Princeton or Cal State. And for universities to be the instruments of financial sleights-of-hand, as opposed to teaching the great books, seems as distorted as the sermons of Elmer Gantry.

    Herman Melville wrote: “A whale ship was my Yale College and my Harvard.” I never read Moby-Dick in college, but I heard that it was a quite a cruise.

    Photo by Jonathan Blundell

    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 and has two children at universities.

  • The World’s Fastest-Growing Cities

    The evolution of cities is a protean process–and never more so than now. With over 50% of people living in metropolitan areas there have never been so many rapidly rising urban areas–or so many declining ones.

    Our list of the cities of the future does not focus on established global centers like New York, London, Paris, Hong Kong or Tokyo , which have dominated urban rankings for a generation. We have also passed over cities that have achieved prominence in the past 20 years such as Seoul, Shanghai, Singapore, Beijing, Delhi, Sydney, Toronto, Houston and Dallas-Fort Worth.

    Nor does our list include the massive, largely dysfunctional megacities–Mumbai, Mexico City, Dhaka, Bangladesh–that are among planet’s most populous today. Bigger often does not mean better.

    Instead, our list focuses on emerging powerhouses like Chongqing, China, (population: 9 million), which Christina Larson in Foreign Policy recently described as “the biggest city you never heard of.”

    Chongqing sits in the world’s most important new region for important cities: interior China. These interior Chinese cities, notes architect Adam Mayer, offer a healthy alternative to coastal megacities such as Shanghai, Hong Kong, Shenzen and Guangzhou, which suffer from congestion, high prices and increasingly wide class disparities. China’s bold urban diversification strategy hinges both on forging new transportation links and nurturing businesses in these interior cities. For example, in Chengdu, capital of the Sichuan province, new plane, road and rail connections are tying the city to both coastal China and the rest of the world. And the city is abuzz with new construction, including an increasing concentration of high-tech firms such as Dell and Cisco.

    India, although not by plan, also is experiencing a boom in once relatively obscure cities. Its rising urban centers include Bangalore (home of Infosys and Wipro), Ahmedabad (whose per-capita incomes are twice that of the rest of India) and Chennai (which has created 100,000 jobs this year). Many of India’s key industries–auto manufacturing, software and entertainment–are establishing themselves in these cities.

    The growth of India and China also creates opportunity for other emerging players, particularly in Southeast Asia by creating markets for goods and services as well as investment capital. Potential hot spots include places like Hanoi, Vietnam, which is attracting greater interest from Japanese, American and European multi-national firms upset with China’s often bullying trade practices and rising costs. Malaysia’s capital Kuala Lumpur–with its rising financial sector–also displays considerable promise.

    Africa also boasts many huge, rapidly growing cities, but it’s hard to identify many of these places–like Lagos, Nigeria, Luanda, Angola or Kinshasa, the Democratic Republic of the Congo–as bright prospects. One exception may well be Cape Town, the beautiful South African coastal city that shone so well during the recent World Cup.

    Latin America, too, has a plethora of huge and growing cities, but it’s hard to nominate the likes of Mexico City or Sao Paulo as likely hot spots for future sustainable growth.

    The best economic prospects in this region lie in more modestly sized cities like Santiago, the capital of resource-rich Chile, and even Campinas, Brazil, a growing smaller city–with 3 million residents–that lies outside the congested Sao Paolo region. This shift to smaller-scaled cities, as Michigan State’s Zachary Neal points out, has been conditioned by massive improvements in telecommunications and transportation infrastructure throughout the urban world. Today, he asserts, it is the ability to network long-distance–not girth–that makes the critical difference.

    This is clear in the Middle East, where the emerging stars tend to be smaller cities. Tel Aviv, whose total metropolitan area is no larger than 3 million, has emerged as a major center for technology as well as one of the world’s premier diamond centers. The other leading candidates in the region hail from the United Arab Emirates, notably oil-rich Abu Dhabi and perhaps its now weakened neighbor, Dubai.

    In North America the best urban prospects–Raleigh-Durham, N.C.; Austin, Texas; Salt Lake City; and Calgary, Canada–are far smaller than homegrown giants New York, Chicago and Los Angeles. Generally business-friendly and relatively affordable, these cities will attract many talented millennials as they start forming families in large numbers later in this decade.

    Europe’s urban problem lies with stagnant or slow-growing population levels, and in the south at least, very weak economies. The only rapidly growing big city lies on the region’s periphery: Istanbul, which straddles the border between Europe and Asia and faces many of the problems common to developing-country mega-cities.

    Overall, the populations of Europe’s cities are growing at barely 1%, the lowest rate of any continent. With low birthrates and growing opposition to immigration, it seems unlikely that any European city will emerge as a bigger global player in 20 years than today.

    Other leading cities all over the world may also be in the early stages of fading from predominance. In the United States, according to analysis by the California Lutheran University forecast, Los Angeles and Chicago, America’s second and third cities, respectively, have fallen behind not only fast-comers like Houston and Dallas-Fort Worth, but even historically dominant New York in such key indicators as job generation and population growth.

    Similarly Berlin, once seemingly poised to thrive in the post-Cold War future, has chronic high unemployment and a weak private sector, compared with Germany’s generally smaller, less unruly successful cities. The Osaka-Kobe-Kyoto area in Japan may also be set to fade a bit, due largely to the overwhelming predominance of Tokyo and the general demographic and economic decline of Dai Nippon.

    Of course, none of this is set in stone. But this list provides an educated peek into which cities are best positioned to prosper and grow in our emerging era of cities.

    Chengdu, China

    The development of interior China, long on the back burner of national priorities, has reached the country’s western-most large city. Chengdu is abuzz with new construction, including an increasing concentration of high-tech companies, including Dell and Cisco. New plane, road and rail connections are tying the city to both coastal China and the rest of the world. With a metropolitan population of 6 million, economic factors–including lower costs–may prove critical to the capital of the Sichuan province. The business-friendly city still has a way to grow to catch up to the GDP per capita of Shanghai.

    Chongqing, China

    Chongqing enjoys rapidly improving transportation links with its neighbors to the west and the coastal megacities. Foreign companies like Ford, Microsoft, Hewlett Packard and Singapore-based Neptune Orient Lines are flocking to the city. The Business Times of Singapore reports that since 1998, Chongqing’s GDP has quadrupled from $21 billion to $86 billion. Last year alone, Chongqing’s GDP expanded at almost twice the rate of China as a whole. The population, according to United Nations projections, should grow from 9 million to 11 million by 2025.

    Chongqing, China

    Chongqing enjoys rapidly improving transportation links with its neighbors to the west and the coastal megacities. Foreign companies like Ford, Microsoft, Hewlett Packard and Singapore-based Neptune Orient Lines are flocking to the city. The Business Times of Singapore reports that since 1998, Chongqing’s GDP has quadrupled from $21 billion to $86 billion. Last year alone, Chongqing’s GDP expanded at almost twice the rate of China as a whole. The population, according to United Nations projections, should grow from 9 million to 11 million by 2025.

    Ahmedabad, India

    This is the largest metropolitan region in Gujarat, perhaps the most market-oriented and business-friendly of Indian states. Gujarat’s policies helped lure away the new Tata Nano plant from West Bengal (Kolkata) to Sanand, one of Gurajat’s exurbs. One Indian academic, Sedha Menon, compares the state–which has developed infrastructure more quickly than its domestic rivals–with Singapore and parts of Malaysia. Per-capita incomes in Gujarat are more than twice the national average. India’s seventh-largest city has a population of roughly 5.7 million and is expected, according to the U.N., to grow to over 7.6 million by 2025.

    Santiago, Chile

    Santiago boasts a diversified economic base: mining, textile production, leather technologies and food processing. Its favorable investment climate has enticed many multinational companies; there are few restrictions on foreign investment, and transparency is extensive. Recent surveys have ranked Chile and Santiago as leading locations in Latin America in terms of competitiveness. The 2010-2011 Global Competitiveness Report ranked Chile the highest in terms of competitiveness (based on institutions, infrastructure, macroeconomic environment, education, market efficiency, financial market development, et. al).

    Raleigh Durham, North Carolina

    Even in hard times this low-density, wide-ranging urban area has repeatedly performed well on Forbes’ list of the best cities for jobs. The area is a magnet for technology firms fleeing the more expensive, congested and highly regulated northeast corridor. One big problem obstructing the region’s ascendancy has been air connections. But Delta recently announced a large-scale expansion of flights there from around the country. Population growth will likely be lead by educated millennials seeking affordable housing and employment opportunities. Today the region has 1.7 million residents; the State of North Carolina projects it will grow to 2.4 million by 2025.

    Tel Aviv, Israel

    This urban region of roughly 3 million may boast the most vibrant economy of any along the Mediterranean. Tel Aviv and its surrounding environs control the vast majority of Israel’s high-tech exports, making it what may well be the closest thing to a Silicon Valley outside East Asia or California. It also boasts a household income that is nearly 50% above the national average for Israel. But perhaps its greatest asset is its free-wheeling lifestyle: Tel Aviv combines an Israeli entrepreneurial culture with the attributes of a thriving seacoast town.

    Kuala Lumpur, Malaysia

    Kuala Lumpur’s prospects lie in a development strategy focused on improving its air service, road and trade infrastructure, much as occurred in previous decades in Singapore. The urban area’s population has grown to over 5.8 million, and demographer Wendell Cox projects a population of roughly 8.2 million by 2025. KL has emerged as a global Islamic financing hub and maintains close ties with the Arabian Gulf’s finance sector. Educational and health care institutions also bolster the city’s growth. Forbes lists Kuala Lumpur as one of Asia’s future financial centers.

    Suzhou, China

    As in the U.S., some of the fastest-growing cities in China are located close to the bigger cities. Suzhou, only 75 miles from Shanghai, seems well positioned to benefit from spillover growth from the megacity. Known as the Venice of China, with many attractive canals and vast international tourism potential, its beauty and history could help secure its aspiration to become “the world’s office.” Some reports suggests Suzhou may already be the most affluent city in China; demographer Wendell Cox estimates that per-capita income is more than three times that of interior cities like Chengdu.

    Hanoi, Vietnam

    Chinese, Japanese, American, Singaporean, European and Indian companies identify this fast-growing city as ripe for industrial and infrastructure growth. The population of the region has doubled since the end of the Vietnam War to almost 3 million, and the U.N. projects a population of 4.5 million by 2025. Along with Ho Chi Minh City (formerly Saigon), Hanoi is expected be one of the fastest-growing GDPs in the world. Hanoi’s GDP growth rate for the first nine months of 2010 was estimated at 10.6%, almost twice that for the same period of last year.

    Chennai, India

    Formerly known as Madras, this metropolitan area of 7.5 million, up from 4.7 million 20 years ago, is projected by the U.N. to approach 10 million by 2025. Located on India’s east Asian coast, the city has so far this year created over 100,000 jobs–more than any other Indian city outside of the much larger Delhi and Mumbai. Chennai’s metropolitan area is taking full advantage of India’s soaring industrial sector, particularly the booming automobile sector. Electronics, led by Dell, Nokia, Motorola, Samsung, Siemens, Sony and Foxconn, are also booming. Chennai is home to India’s second-largest entertainment industry, behind Mumbai.

    Austin, Texas

    Austonites tend to be smug–but they have good reason. The central Texas city ranked as the No. 1 large urban area for jobs in our last Forbes survey. Along with Raleigh-Durham, Austin is an emerging challenger for high-tech supremacy with Silicon Valley. The current area’s population is 1.7 million and is expected to grow rapidly in the coming decades. Austin owes much both to its public sector institutions (the state government and the main Campus of the University of Texas) and its expanding ranks of private companies–including foreign ones–swarming into the city’s surrounding suburban belt.

    Abu Dhabi, United Arab Emirates

    Oil rich Abu Dhabi is among the world’s wealthiest countries in terms of per-capita GDP, which exceeds $68,000. However, the non-oil sector is likely to grow to about 45% of the GDP in coming years. To do so, the government has started to invest its oil revenues in construction, tourism and the electricity and water industry. Abu Dhabi is also helping to keep its neighbor Dubai afloat. If Dubai, with its world class infrastructure, can make a comeback, a global city separated by 80 miles of desert Arabian Gulf coastline could arise.

    Campinas, Brazil

    Campinas, located around 50 miles north of São Paulo, the country’s dominant industrial center, has attracted many technology companies, including IBM, Dell, Compaq, Samsung and Texas. The city also boasts a major research and university center. Firms engaged in high-tech activities–following a global pattern–tend to cluster in relatively pleasant, affordable and efficient places. Campinas could prove a big Brazilian beneficiary of this trend.

    Melbourne, Australia

    Australia has resources galore and relatively few people. But which of its cities is poised to benefit most from the nation’s expanding trade with China and India? Sydney’s costs have been shooting up–particularly for housing, but Melbourne’s political class seems about to open up new land for suburban development to restore some of the area’s affordability for younger Australians. Demographer Bernard Salt has predicted that Melbourne’s population will exceed Sydney‘s in less than 20 years. Melbourne also boasts Australia’s most walkable and pleasant urban cores , a pleasant San Francisco-like climate and a European ambiance.

    Bangalore, India

    Many big players in tech and services–Goldman Sachs, Cisco, HP as well as India-based giants like Tata–have located operations in Bangalore. But the city also boasts home-grown tech giants Infosys and Wipro, which each have over 60,000 employees worldwide. Since 1985 Bangalore’s population has more than doubled to over 7 million and is projected by the U.N. to reach 9.5 million by 2025. In the future, maintaining Bangalore’s advantage over smaller, less congested cities could prove a challenge.

    Salt Lake City, Utah

    Once seen as a Mormon enclave, the greater Salt Lake urban area–with roughly 1 million people –has every sign of emerging as a major world player with a wider appeal. The church still plays a critical role, in part by financing a massive redevelopment of the city’s now rather dowdy city core. The area’s population has doubled since the early 1970s and will grow another 100,000 by 2025 to well over 1.1 million. New companies are flocking to this business-friendly region, particularly from self-imploding California. Increasing national and global connections through Delta’s hub will tie this once isolated city closer with the wider world economy.

    Nanjing, China

    The one-time Imperial and Republican (Nationalist) capital sits only 150 miles from Shanghai. The relative affordability of Nanjing has drawn huge construction projects to the city, which is also the capital of Jiangsi Province. The city is developing a transport hub, and huge commercial construction projects abound in the downtown area. A majority of employment is in the fast-growing service sector. The metropolitan economy grew 50% just between 2006 and 2008, and future rapid growth is likely.

    Cape Town, South Africa

    The second-largest city in South Africa behind Johannesburg, Cape Town made the most of the recent World Cup. The region of some 3 million boasts fast-growing communications, finance and insurance sectors. Cape Town is looking to intellectual capital, transportation assets, business costs, technology, innovation and ease of doing business as its primary assets. In 2009 Empowerdex rated Cape Town as the top-performing municipality in South Africa for service delivery. About 97% of the operational budget went to infrastructure development, ensuring that households can enjoy adequate sanitation and water access.

    Calgary, Canada

    You don’t have to buy the notion of a climate-change-driven northern ascendancy to see a bright future for Alberta’s premier city. Calgary is positioned well on the fringe of Canada’s largest energy belt and enjoys lower taxes and less stringent regulations than its Canadian rivals. Calgary has been hit by a slowdown in energy business, but over time demand from China, India and a slowly recovering world economy should boost this critical sector. The region is expected to be back to its familiar place on top among Canadian urban economies by next year.

    The World’s Diminishing Cities: Chicago, Ill.

    Great cities don’t only rise, some decline. Even with Barack Obama in the White House, Chicago is struggling with persistent job losses that, since 2000, are exceeded only by Detroit among the nation’s top 10 largest U.S. regions. The Windy City’s deficit as a percentage of spending–a remarkable 16.3 %–is now higher than Los Angeles and twice that of New York. Moreover, crime remains stubbornly high, and the widely hyped condo boom has left a legacy of uncompleted buildings, foreclosures and vacancies.

    The World’s Diminishing Cities: Berlin, Germany

    By all rights, Berlin should be a European boomtown: The capital of united Germany, a natural crossroads to the east and Europe’s bohemian hot spot. But it remains, as its mayor, Klaus Wowereit, famously remarked, “poor but sexy.” Berlin suffers unemployment far higher than the national average, and its gross added-value per inhabitant amounted to just over half that created by residents in the northern city of Hamburg, which has about half as many people. One-quarter of the workforce earns less than 900 euros a month, and one out of every three children lives in poverty.

    The World’s Diminishing Cities: Osaka-Kobe-Kyoto, Japan

    Few places possess a more glorious urban pedigree than Japan’s Kansai region. But the shift of manufacturing to China and other countries has undermined the economy of Osaka, traditionally the industrial heart of Japan. As Japan shrinks both economically and demographically, Tokyo, the world’s largest city, looms ever larger while Osaka’s role is, as one demographer put it, “fading away.” Tokyo’s population, now over 30 million, has grown to be double that of the Osaka region, and continues to outpace it. Most critical: It is to Tokyo, not Osaka, that Japan’s diminishing reserves of educated young people–and industries dependent on their talent–are headed.

    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 Sarmu

  • Religious Freedom or A Tax-Free Ride?

    The furor over a mosque in Manhattan has swirled around issues of personal freedom and collective tolerance. But very little of the discussion has focused on the pros and cons of construction of places of worship in our cities and suburbs, or on their tax status. In a country that displays high rates of worship and has a growing population, it’s to be expected that religious spaces would be on the increase. Yet, like all things that are added to the built environment, churches, synagogues, temples and even meeting halls can have a negative impact on those who live in the area. Economists term this a ‘negative externality’.

    Parks are a simple analogy, in that it is nice to have somewhere to walk your dog if you live nearby, but it is not so pleasant if dogs are shipped in by their owners from other neighborhoods to use the space, especially if they have little incentive to clean up after themselves [that would be the owners, not the pets]. Places of worship are the same, insofar as it might be convenient to have a temple next door, but only if it is for a compatible religion. If not, it is just another source of traffic and noise for the neighborhood, and if it is a religion that is presently controversial, then there is even more likelihood of unhappiness.

    One of the reasons that so many congregations can afford to build new spaces for themselves is that religious enterprises are not taxed. A glance at the chat rooms across the Internet suggests that this is a warm-button topic — not of major importance, but ready to become so at a moment’s notice. Those who patrol these issues have developed a rather neat logic for this tax exemption, namely, that payment of income or property taxes by religious institutions would violate the separation of church and state. Indeed, the Supreme Court seems to have fostered this logic, arguing in 1970 in Walz vs. Tax Commission of the City of New York, that a tax exemption for churches “restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other”.

    Logically then, payment of taxes by religious groups should indeed be considered unconstitutional. But what if we were to separate the payment of taxes on income from the payment of property taxes? It’s reasonable enough to argue that the former should be exempt, especially if you are comfortable with the reality that plenty of corporations and many affluent individuals pay little or nothing in income tax.

    However, the non-payment of property taxes is quite different, as it has a large impact on the way in which cities operate. Religious enterprises can afford to outbid their competitors when purchasing land as they buy at a discount, namely, the dollars saved on non-payment of property taxes. Put another way, they can afford to purchase marginally larger properties, as they are able to fold the putative taxes into their bids for land.

    Congregations can often afford to buy prime locations at urban intersections; in the suburbs, they can afford to buy larger lots and build mega-churches with vast parking lots. The scale of these developments can be remarkable. A new LDS temple that is planned for Gilbert, Arizona will cater to tens of thousands of worshipers on a 21 acre site.

    Now, I would rather that the urban fabric be maintained than be left idle, especially at present, while the construction industry is in poor shape. It makes little sense, though, to encourage market distortions. Churches can break up the land-use in a city, inserting a structure that is used intermittently among, say, office spaces for which there can be high demand. Building any kind of religious structure in Manhattan, where land can fetch $100 million per acre, serves to drive up the costs of real estate yet further. In the suburbs and exurbs, where land is of course infinitely cheaper, the distortion is less, but the impacts are potentially higher. Vast mega-churches have all the impact of a Wal-Mart but none of the tax benefits, and of course none of the jobs.

    How much are we talking here in hard cash? My simplistic calculations and equally non-rigorous research suggest that there are approximately 350,000 religious spaces in the US. If we assume that each occupies 10,000 square feet [and many are five to ten times larger], then that would be approximately 80,000 acres of land on which taxes are not being paid. Clearly, few of those acres are as expensive as those in Manhattan, but even in suburban Phoenix, raw land reached $300,000 per acre before the 2008 correction. My arithmetic suggests that $20 billion of land is being used without tax payment, which would amount to tens of millions annually.

    Places of worship are in general highly inefficient uses of space if you simply take into account the number of hours per week they are used. This notwithstanding, they place a burden on the public purse in terms of water and sewerage links, road maintenance, and fire and police protection—the fact that they are unoccupied may actually increase the cost of surveillance. These services, plus the opportunity costs of lost taxes, come at a moment when nearly all municipalities and most States are looking for ways to replace contracting revenues. Law professor Evelyn Brody has done a fabulous job in documenting the ways in which non-payment is hurting the public sector, and the innovative ways in which some jurisdictions are using PILOTS (payments in lieu of taxes) to make up the losses.

    As we know, religion is a touchy subject. Asking congregations to pay their property taxes will be taken by many as an assault on religious freedom. But if we also look at the larger class of charitable and non-profit organizations, we find many small charities that could not and thus should not pay property taxes. Small churches, mosques and temples would be in this category. But there are also non-profit organizations that are wealthy; Harvard University should pay millions of dollars on its holdings in Boston, and the same is true of large, wealthy religious organizations with land holdings throughout the country’s urban areas.

    Why single out what many regard as ‘the good guys’? The answer is that welfare subsidies distort the market, wherever and whenever they occur. That’s true of mega-churches, and it’s equally true of new shopping malls that receive tax incentives to locate in one jurisdiction rather than another. Taxes are of course anathema to many in our society, but then so is welfare. So let’s be consistent and get rid of property tax subsidies for developers and large charities, regardless. If that includes large churches, then so be it. The new revenues will be a boon for municipalities, so that they can provide services for those who need them most. Some organizations will claim they cannot pay, but even there the news is not bad: There is evidence that when land-uses change, redevelopment can have a multiplier effect. This was true of plenty of military sites, and it has been documented for churches being re-purposed in inner city redevelopment areas.

    In its 1970 decision, the Supreme Court observed that “the power to tax involves the power to destroy.” Yet it is also the case that the power to provide exemptions is a powerful distortion of the ways that cities organize themselves as efficient providers of goods and services. To the extent that we can have a sensible discussion of religion or taxation, let’s explore just which interests are served by subsiding worship.

    Photo by rauchdickson of Solid Rock megachurch, Monroe, Ohio

    Andrew Kirby is an urbanist based in Phoenix. For several years he lived next door to the 12th century church in Cholsey in the UK, where Agatha Christie is buried.
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  • China Development: Go West, Young Comrade

    Deng Xiaoping, the pragmatic leader who orchestrated China’s ‘reform and opening-up’ 30 years ago, once said that “some areas must get rich before others.” Deng was alluding to his notion that, due to the country’s massive scale, economic development could not happen all at once across China. Planning and implementation of such an economy would take years, even decades, and some areas would inevitably be developed before others.

    The logical place to start was the coastal regions of China, with the natural advantage of access to Asian and overseas markets via the South China Sea and Pacific Ocean. Not surprising then that the two areas that benefited most after initial economic reforms were the Yangtze River Delta region in the east and Pearl River Delta region in the south. Both places became international manufacturing centers with numerous factories and busy seaports.

    Today, the prosperity of the Yangtze River Delta can be experienced in Shanghai, ‘the Pearl of the Orient’- undoubtedly China’s most modern and cosmopolitan city. Down south in the Pearl River Delta, the city of Shenzhen, chosen by the Central Government as a ‘Special Economic Zone’ in 1980, transformed from a small fishing village to a bustling metropolis of nearly 10 million people in a mere 30 years. Both places best represent China’s economic achievements of the recent past.

    Although China’s coastal regions continue to develop, the initial boom has already slowed. Furthermore, foreign investors are beginning to grow weary by the increasing costs of doing business in cities like Shanghai and Shenzhen. Now both international and domestic businesses have their eyes looking towards the interior of the country, where overhead costs are lower and the cities are building the necessary infrastructure to support growth.

    China’s vast western region will be perhaps the most exciting economic development story of the next decade. The country’s west includes 6 provinces, 5 autonomous regions and 1 municipality. Overall the entire region comprises a whopping 70% of China’s landmass and 28% of its population. It also currently accounts for 17% of the country’s GDP, but that is set to change for the better.

    In 2001, the Chinese government implemented its Western Development Strategy also known as the ‘Go West’ campaign. The lagging economic progress of the region prompted the Central Government to offer incentives for business development, including a 10% corporate income tax reduction. The plan also calls for massive infrastructure development both in urban and rural areas.

    Nearly 10 years after the beginning Western Development Strategy, the positive effects are evident in the region’s largest cities. The key cities that have benefitted most so far are Xi’an (capital of Shaanxi Province), Chengdu (capital of Sichuan Province), Kunming (capital of Yunnan Province) and Chongqing (a direct-controlled municipality). These cities form a tight bond, and despite each being within a less than 2 hour flight from one another, each is unique in character and culture.

    At the center of this prosperity is the Chengdu-Chongqing Megaregion. About 200 miles apart from each other, the two cities form a combined urban population of about 10 million people. Chengdu and Chongqing are the principal economic, government, and cultural centers that serve a regional population of nearly 110 million (the combined population of Sichuan Province and Chongqing Municipality). Given these demographics, the potential for growth in these two cities is enormous.

    In the past, like the ambitious living in our own heartland, those from China’s interior were forced to leave home for the far-off coastal regions to benefit from the country’s economic growth. Migrant workers from Sichuan had it especially difficult, facing employment discrimination due to their strong local accent (seen as low-class by the eastern cosmopolitans) and the misperception that they are lazy workers. Today, the rise of Chengdu-Chongqing Megaregion means that workers from Sichuan need not go far from home in order to find opportunity. This is a considerable departure from China’s migrant worker narrative of the past 30 years.

    Increasingly what you see today is a reversal of past emigration trends, as not only young people from the Chengdu-Chongqing Megaregion opt to stay close to home but people from other regions relocate to the interior to take advantage of the growth.

    There is a bit of a rivalry between the cities of Chengdu and Chongqing, with much talk about which of the two will become western China’s most important city. In reality they are more like ‘sisters’ as both cities stand to benefit. As my American friend who lived in the area for over 10 years described the relationship, “Chengdu is the fat provincial nobleman to Chongqing’s beer and hot pot steel worker.”

    In the case of Chongqing, he is referring to the importance of the city as an industrial center, both in metal manufacturing and natural resource mining (the surrounding area is rich in coal and natural gas). In contrast, Chengdu is quickly becoming a major player in China’s information technology sector.

    Much of this has to do with Chengdu’s advantageous geography. Whereas the surrounding terrain in Sichuan and Chongqing is mountainous and hilly, Chengdu lies in a flat, fertile basin, allowing the city to sprawl out. Dubbed the ‘Land of Abundance’ for its long history of agricultural prosperity, Chengdu is today abounding in domestic and foreign investment in high-tech.

    The local government has set up the ‘Chengdu Hi-Tech Industrial Development Zone (CDHT)’ with 2 locations: the South Park and the West Park. Both areas lie outside the historical city center and are being built on previously undeveloped land. The character of the CDHT is not the dense urban forest of supertall skyscrapers that characterizes other Chinese cities. Rather, a series of modern low-rise office parks can be seen popping up in the CDHT, not dissimilar from what can be found close to where I grew up in Silicon Valley.

    Already, international IT behemoths like Intel have established operations in the CDHT, having opened semiconductor assembly and testing facilities. Other American companies look to expand in the CDHT. Just a few days ago Dell Computer announced it would open an operations center in Chengdu, creating 3,000 new jobs. Cisco Systems has also been involved in Chengdu, collaborating with local institutions like the University of Electronic Science and Technology of China in research and development.

    Chengdu attracts foreign investment not only because of its lower cost-value compared to other cities in China but because of its efficient infrastructure and logistics. Chengdu’s Shuangliu Airport is national airline Air China’s third major traffic hub after Beijing and Shanghai. The city is also undergoing the construction of a comprehensive subway system with the first line scheduled to open in on October 1st. This line, Line 1, will connect the historic center of the city with the South Park area of the CDHT- making commuting for IT workers who live in the city more reasonable.

    Most interestingly, Chengdu is also promoting quality of life when courting business investment. The local government has established what is called a ‘Modern Garden City’ to keep in line with the city’s history as an agricultural base. The sense of the past is strong with locals, and Chengdu is doing everything to preserve this despite the development.

    If Deng Xiaoping were still alive today, he would probably be proud to see Sichuan flourishing- after all it is the patient pragmatist’s native region.

    Adam Nathaniel Mayer is an American architectural design professional currently living in China. In addition to his job designing buildings he writes the China Urban Development Blog.

    Photo by Toby Simkin

  • California’s Failed Statesmen

    The good news? Like most rock or movie stars, there’s nothing fundamentally wrong with California. It’s still talented, and retains great physical gifts. Our climate, fertility and location remain without parallel. The state remains pre-eminent in a host of critical fields from agriculture to technology, entertainment to Pacific Rim trade.

    California can come back only if it takes a 12-step program to jettison its delusions. This requires, perhaps more than anything, a return to adult supervision. Most legislators, in both parties, appear to be hacks, ideologues and time-servers. This time, when the danger is even greater, we see no such sense of urgency. Instead we have a government that reminds one more of the brutally childish anarchy of William Golding’s 1954 novel “Lord of the Flies.”

    Arnold Schwarzenegger has not turned out to be that supervision. Rather than the “post-partisan” leader hailed by the East Coast press, he has proven to be the political equivalent of the multi-personality Sybil. One day he’s a tough pro-business fiscal conservative; next he’s the Jolly Green Giant who seems determined to push the green agenda to a point of making California ever more uncompetitive.

    Contrast this pathetic performance with what happened after our last giant recession in the early 1990s. At that time, a bipartisan coalition of leaders – Speaker Willie Brown, State Senator John Vasconcellos and Governor Pete Wilson – worked together to address what was perceived as a deep economic crisis. They addressed some key problems and brought the state back from the brink. California recovered smartly between the mid-90s and the new millennium.

    Overall though, things are worse now. California has been flirting for the past year with its highest unemployment rate since the Great Depression. The last time we could blame the end of the Cold War for much of our economic distress; now the problem is a more broadly based, largely self-inflicted secular decline.

    A bloated government is part of the problem: Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent. The overall tax burden as a percentage of state income, once middling among the 50 states, has risen to the sixth-highest in the nation, says the Tax Foundation. Even worse, the state is getting ever less benefit from these revenues; since the Pat Brown era the percentage of budget spent on basic infrastructure has dropped from 20 to barely 5 percent.

    Although these taxes are often portrayed as “progressive,” California has continued to become more socially bifurcated. Our ranks of middle-wage earners are dropping faster than the national average even as the numbers of the affluent and poor swell. Overall California’s per capita income, roughly 20 percent above the national average in 1980, now barely stays with the national average. When housing and other costs are factored in, Los Angeles, San Francisco and Fresno rank among the top five major urban areas in America in terms of percentage of people in poverty, according researcher Deborah Reed of the Public Policy Institute of California. Only New York and Washington, D.C. do worse.

    At the root of these problems is an increasing lack of economic competitiveness. An analysis of the economy made for the Manhattan Institute shows California losing its edge in everything from migration, income, jobs and in entertainment industry employment. Tech companies may cluster in Silicon Valley but many are sending their new jobs abroad or to other sites. Recently, several leading Bay Area firms – Twitter, Adobe, eBay, Oracle and Adobe – have established major new operations in the Salt Lake area alone.

    So how do we turn it around? First, let’s find some adults, like former Speaker Robert Hertzberg or GOP financer Gerald Parsky, who know what it is to run a business and comprehend that the economy actually matters, and get them to head up a commission on the economy. Second, our leaders and policy elites must engage the emerging new business leadership of the state, which is increasingly immigrant, Asian and Latino.

    Right now neither party seems focused on the state’s future besides enriching their core constituencies. Lower taxes – the favored strategy of the right – on the already wealthy reflects an understandable desire to preserve one’s asset but is insufficient as a strategy.

    Democrats meanwhile seem determined to defend public sector pensions, Draconian labor, the high-speed rail boondoggle and environmental regulations, no matter what the cost to the economy.

    However contradictory their sound bites, the established parties are each following a script that would assure the next generation of Californians – largely Latino – remain an underclass that will have to move elsewhere to reach their aspirations. The left would do it by killing jobs in such fields as agriculture, manufacturing, construction and warehousing. As Robert Eyler, chairman of the economics department Sonoma State puts it, “the progressives have become the regressives.”

    For their part the GOP would kill the new California by starving it. They have no plan to bolster the basic services – like community colleges, roads, water and power systems – that will allow future working-class Californians to thrive.

    Their interests ignored by the parties, the immigrants and their offspring still represent the very key source of demographic energy and entrepreneurship that can revitalize the state. If you still want to see hopeful stirrings in California, go to places like Plaza Mexico in Lynwood or the new Irvine center recently built by the Diamond Development Group. Appealing to young families and distinct tastes, these retail facilities have thrived as the rest of the state’s overall retail economy has declined.

    More important still are the companies started by immigrant entrepreneurs like John Tu, CEO of Kingston Technology or scores of smaller Asian-owned firms in places like the San Gabriel Valley. Since the 1990s, newcomers have launched roughly one in four Silicon Valley startups.

    Add to this the muscle of the emerging Latino economy, led by food processing companies like the Cardenas Brothers, who now provide Costco with its frozen Mexican food.

    Due to their strong family and cultural ties in California, such ethnic firms appear less likely to move than more Anglo-dominated companies. But if the state keeps eroding public services and adding new regulations, these firms – like their counterparts in Silicon Valley and elsewhere – will place most of their new jobs as well in Utah, Texas or overseas.

    What we have here, in the end, is a massive disconnect between economics and politics. Does anyone in Sacramento talk to or even know about the largely Middle Eastern-led L.A. fashion industry? Is anyone talking to the hip sportswear mavens of Orange County’s own “Velcro valley”? Or what about agriculture, our traditional ace in the hole, which is largely disdained by the state’s intellectual and media class who see in large farms the work of the corporate devil?

    Somehow these productive voices – essential to our comeback – must be placed at the center of the debate. Sacramento’s leaders need to talk not just to lobbyists but to the key job-creators.

    These are the people who, even in hard times, are showing how we can grow an economy based on our natural advantages of climate, ethnic diversity, entrepreneurship and location.

    Ultimately we must make the creation of new jobs a priority that goes beyond formulaic mantras about lower taxes or illusory, state-supported “green jobs.” With a return to growth, California can still address its basic problems and challenges. But first we must corral the ideological hobbyhorses now running wild through Sacramento and make the needs of job-creators the central issue for our policy-makers.

    This article originally appeared in the Orange County Register.

    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 Nate Mandos