New Geography

Category: Economics

  • The Great Deconstruction – First in a New Series

    History imparts labels on moments of great significance; The Civil War, The Great Depression, World War II. We are entering such an epoch. The coming transformation of America and the world may be known as The Great Deconstruction. Credit restrictions will force spending cuts and a re-prioritization of interests. Our world will be dramatically changed. There will be winners and losers. This series will explore the winners and losers of The Great Deconstruction.

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    The phrase, The Great Depression, was coined by British economist Lionel Robbins in a 1934 book of the same name. Its unexpected onset followed years of speculative growth during which economist Irving Fisher famously proclaimed, “Stock prices have reached what looks like a permanently high plateau.” The depression can be traced to the stock market crash of Black Tuesday, October 29, 1929, when stocks lost $14 billion in a single day. During the Great Depression that, followed, unemployment soared to 25%, a drought turned the farm belt into a dust bowl and international trade plummeted by two-thirds. The worldwide slump did not end until the advent of World War II.

    A similar, albeit less catastrophic, stock market collapse occurred in 2008. Following the speculative rise of a housing bubble, trillions of dollars in home equity and stock value were wiped out and 15 million Americans were left looking for work. Paul Krugman, columnist for the New York Times, labeled the worst downturn in nearly a century, The Great Recession. The Dow fell from a peak of 14,093 in October of 2007 to 6,626 in March of 2009. While Wall Street recovered half of its losses thanks to TARP, an $800 billion financial rescue package for the banks, Main Street has lagged behind. Home equity fell by $5.9 trillion. Housing starts plummeted from 2,075,000 in 2005 to 306,000 in 2009 decimating the construction industry. Foreclosure notices went out to 2.8 million homeowners in 2009 and 4,000,000 are projected for 2010. Eight million jobs have been lost and despite an $800 billion stimulus package, unemployment remains at 9.7%. Under-employment, the real jobless number, has reached 17%. Diversion of agricultural water to protect an endangered species in California and a severe drought has brought bread lines to the famously fertile Imperial Valley.

    Like the Great Depression before it, this recession will leave permanent scars on the people. The depression experience made our parents forever frugal. The Greatest Generation became savers, amassing trillions in home equity, stocks and savings accounts. In contrast, their spoiled and coddled children, the Baby Boomers, became the generation of instant gratification. Easy credit and home equity credit lines meant flat screen TVs, vacations, jewelry and jet-skis could be acquired instantly and paid for later. The Baby Boomers entered Congress, the state house and local government with the same attitude: buy now and pay later. Their largesse was fueled by a bubble mentality. Even though the Dot-Com Bubble burst in the late 90s, it was followed by the Housing Bubble of the 00s and a seemingly endless stream of revenue. A spending frenzy ensued with equity rich homeowners offered home equity lines of credit and credit cards with $100,000 limits.

    It wasn’t just consumers who went wild. In many states, such as California, so did the Legislature. In 1999, California rewarded its public employees with generous pensions (SB 400) that allowed retirement at age 50 with 90% of salary – for life. The California Legislative Analyst’s Office estimated the cost of SB 400 at $400 million per year. In 2009, the actual cost was $3 billion. The pension drain contributed to the $20 billion state deficit that California now faces. A Stanford Institute for Economic Policy Research report estimates California’s unfunded pension obligation at $500 billion.

    Cities in California matched SB 400, as did counties and municipal agencies, and it led to similar economic results. On April 6th, the City of Los Angeles announced furloughs for public employees, a 40% pay cut, effective immediately to help plug a $500 million deficit. Vallejo, a small city of 120,000 that generously paid its City Manager $600,000 per year and its firemen, $175,000, was forced to file for Chapter 9 Municipal Bankruptcy once the Great Recession dried up their honey pot.

    The problem has consumed municipal government across the nation. The Center on Budget and Policy Priorities recently estimated budget deficits for cities and counties would reach $200 billion this year. Detroit, with a $300 million deficit, has proposed leveling and returning huge sections of the decaying city to farmland.

    At the Federal level, the Obama Administration projects deficits of $1 trillion per year as far as the eye can see. The unfunded obligations for Social Security and Medicare are a staggering $107 trillion. Congressional Budget Office Director Douglas Elmendorf said, “U.S. fiscal policy is unsustainable, and unsustainable to an extent that it can’t be solved through minor changes. It’s a matter of arithmetic.”

    Elmendorf said fixing the problem will require fundamental changes and government would need to make changes in the large programs, Medicare, Medicaid and Social Security and the tax code, to get the deficit under control.

    When the Credit Card is Denied …

    Such deficits simply cannot be ignored. There will be an intervention. It may come from outside if China, Japan and the Saudis stop buying our debt. It could come from our children who may object to being forced to repay debt they did not spend. It will more likely come from our parents, The Greatest Generation, in the form of a credit intervention. Our parents may intervene, like they did back in the 60s when the Boomers experimented with sex, drugs and rock n roll. When some of us lost control, it was our parents who intervened and straightened us out. They may be forced to intervene once again. this time at the ballot box in November 2010. The Greatest Generation may send the politicians packing, impose order where chaos has reigned, and cut up the credit cards used by their spoiled and coddled Baby Boomer children. Have you noticed who attends the Tea Party rallies? They are retired, educated, tax paying middle class Americans – they look a lot like our parents.

    Deconstruction will take many forms and will encompass all that we know. Private industry has already shed 8 million jobs. The firing of private employees was low hanging fruit. Once untouchable social programs will be forced to disappear. Sacred cows will be slaughtered. Pet programs will be defunded. Even the military may have to learn to live with less. Further changes imposed will cut deep, reaching the union protected public employees and their constitutionally protected pensions. Just as General Motors was forced to abandon its venerable Pontiac brand along with Saturn, Saab and Hummer, unions will lose many of the benefits they obtained the last ten years. There will have to be changes to Medicare, Medicaid and even Social Security.

    We learned something from the health care fiasco. If we treat seniors, our parents, fairly and honestly, they will make the sacrifice. They were upset with the unfairness of the Cornhusker Kickback and the Louisiana Purchase. They became furious when Cadillac health care plans of union members received different treatment than theirs. Treated fairly, our parents will be part of the solution.

    Fifteen million Americans are looking for work. The jobs will not return soon. Thirty-three states have deficits that must be resolved by law. It will not happen without major sacrifice and draconian job lay-offs of public employees at the national, state, and local levels. The furloughs in Los Angeles only portend things to come. The Great Deconstruction has already begun.

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    The Great Deconstruction is a series written exclusively for New Geography. Future articles will address the impact of The Great Deconstruction at the national, state, county and local levels.

    Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University and Director of Special Projects at the Hoag Center for Real Estate & Finance. He has been a successful real estate developer in Newport Beach California for twenty-nine years.

  • Jobs Will Rule November

    Health care lays behind him, financial reform and climate change ahead, but for President Barack Obama–and his opponents–there is only one real issue: jobs. The recent employment reports signal some small gains, yet the widespread prognosis for a slow, near-jobless recovery threatens the president and his party more than any major domestic challenge.

    Tea party activists and conservative ideologues often link the president’s dwindling popularity to an overreach on health care, but it all boils down to the old Clintonian adage: It’s the economy, stupid. Health care reform is simply too complex and its long-term effects too unknowable to be a winning issue for either side.

    The jobs deficit, on other the hand, is immediate and affects tens of millions of families. You can start with the highest-ever percentage of long-term unemployed on record. In recent months there have been roughly five to six applicants for every open position. Youth unemployment reaches near 20% for workers in their 20s–more than 25% for teenagers and over 43% for black teens. Even if the economy improves, according to the administration predictions, unemployment could remain close to double digits by the mid-term elections and over 8% by 2012.

    The prospect of long-term unemployment, and underemployment, is clearly damaging the “hope” brand once associated with the president. Recent CBS poll data show that 84% of Americans are worried about the economy.

    Over a third of those polled were concerned that someone in their household might lose their job. Some 52% identify the economy as the most important issue, while health care registered only 13%. Given the administration’s focus on health care and other issues–such as climate change–it’s not surprising that barely two in five of those polled approve of the president’s handling of the economy.

    Those inside the Washington bubble are too absorbed with political maneuverings to focus on the basic. The primary domestic challenges for the country lie not in addressing climate change, suburban sprawl or gay marriage, but spurring employment and generating new wealth.

    Part of our problem is that the two main parties are committed primarily to serving the interest of aligned constituencies .Republican dogmatism and canine-like obedience to short-term corporate profits contributed mightily to the economic meltdown. In its period in power , the GOP failed to either restrain Wall Street or address the nation’s indebtedness. No surprise then that many even moderate, middle-class voters opted for the Democrats over the past two elections.

    The question now is whether the Democrats are squandering their advantage. After almost 15 months in office, Democratic dogmatism–a mixture of faith in all forms of federal spending, “green jobs” and ever more regulation–has not exactly turbo-charged the economy. As a result, middle-class voters–those making $50,000 to $75,000 annually, have been slipping from the Democrats, according to a recent Wall Street Journal poll. These are precisely the voters who also put Scott Brown into the Senate.

    Yet the president’s situation is far from hopeless. Manufacturing payrolls are slowly beginning to grow, and industrial production is on the upswing. Survivor sectors such as health care continue to create new jobs. The bleeding may have finally stopped in construction, where the recession has been particularly devastating. Although the generally high-wage finance and information sectors continue to shrink, rapid growth in temporary business services could presage a new wave of permanent hires.

    These improvements suggest new opportunities for Obama. It allows him to point to a relatively stronger economy–particularly compared with Japan and the E.U.–as proof both of his policy acumen and our country’s overall vitality.

    This is when we really find out whether Obama is a thoughtful moderate of the campaign trail who embodies American exceptionalism or the hard-edged tool of the Democratic constituency groups. So far he has been a man of the left more comfortable with expanding the public sector than finding ways to boost private sector payrolls.

    The stimulus, crafted by old-dog Democrats like Nancy Pelosi and Harry Reid, with its emphasis on government workers and the university-industrial complex, solidified this notion. A public-sector-oriented approach has proved to have limited popular appeal, particularly at a time when many in the private sector regard the public workforce as an oppressive and overcompensated privileged class.

    Administration fiscal policy also erred in its focus on Wall Street. Obama, described during the 2008 campaign as the “hedge fund” candidate, has indeed done very well for this privileged class. Yet Democrats are hard-pressed to make the case that what’s good for George Soros is good for the USA.

    Now the question is whether the president can refocus on jobs. This will take, among other things, backing off the economically ruinous climate change agenda. Even the most gullible economic development officials are beginning to realize that “green jobs” are no panacea.

    In fact, as evident in Spain, Germany and even Denmark, over-tough green legislation can destroy the productive capacity of the most enlightened industries. Similarly in green strongholds like California and Oregon, the mounting climate change jihad could slow and even explode the incipient recovery by imposing ever more draconian regulation on businesses that can choose to migrate to less onerous locales.

    There are some hopeful signs of Obama’s repositioning. His recent moves embracing nuclear power and off-shore oil drilling, however inadequate, show that he’s at least trying to triangulate between the green purists and the unreconstructed despoilers. Some sort of moderated energy legislation–there’s no way to get the more radical House version through the Senate–would reassure businesses and the public that the president has jobs as his No. 1 priority.

    The well-funded, politically connected environmental lobby, no doubt, will try to head off any dissent from its agenda. But the same hard-boiled pol who threw his own pastor under the bus–remember Rev. Jeremiah Wright?–would seemingly be willing to diss pesky affluent white greens who, after all, have nowhere else to go politically.

    An equally good opportunity lies in the push for financial reform. As in the case of health care, the Republicans have a miserable record to defend. After all, the GOP dominated Congress and White House did little to rein in the out-of-control financial sector. Sure, there’s blame to go around for folks like Barney Frank but the buck was definitely with the Republicans, and they failed.

    Main Street businesses that felt ignored by the stimulus might look favorably on tough administration polices against big banks. Republicans could yet score points by opposing “too big to fail” provisions, as Mike Barone suggests, but one has to wonder if Republicans possess the moxie to stand up to large corporate interests, even detested ones.

    But right now the burden is on the president. Building on what is still a weak recovery, he must make clear that jobs and growth are his top domestic priorities. If he fails to communicate that message adequately, the voters, however leery of the Republicans, will rebuke him.

    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 Febuary, 2010.

  • Immigrants Key to Economy’s Revival

    In Washington on Sunday, the tens of thousands of demonstrators demanding immigration reform looked like the opening round of the last thing the country needs now: another big debate on a divisive issue.

    Yet Congress seems ready to take on immigration, which has been dividing Americans since the republic was founded.

    But identifying immigrants as a “them,” as both their advocates and nativists do, misses the point. Immigrants — and their children — are the people who will help define the future “us.” They are also critical to the revival of the U.S. economy.

    This is particularly true on the entrepreneurial frontier.

    Overall, some of the country’s highest rates of entrepreneurship are found among immigrants from the Middle East, Cuba, South Korea and countries of the former Soviet Union. These recent arrivals regularly build new businesses — from street-level bodegas to the most sophisticated technology firms.

    Immigrants started one-quarter of all venture-backed public companies between 1990 and 2005. In addition, large U.S. firms are increasingly led by executives with roots in foreign countries, including 14 CEOs of the 2007 Fortune 100.

    Nowhere is this contribution more critical than in our major cities, many of which would be economically destitute without these immigrant communities.

    In Los Angeles County, for example, the self-employment rate among immigrants is more than 10 percent — almost twice that for the native-born. Nationwide, according to the last economic census, the number of all Latino establishments increased by nearly three times the national average, while those owned by all Asians expanded by two times.

    Immigrant contributions extend across a range of activities, from retail and food to culture. Asian immigrants, like the Italians and Jews before them, have concentrated in specific niche markets and then expanded beyond historic ghettos.

    Asian Indians, who began emigrating in large numbers starting in the 1970s, specialized in hotels and motels across the country. South Koreans opened greengroceries in New York and Los Angeles. Vietnamese became known for nail parlors, and Cambodians for doughnut stores. Overall, Asian enterprises expanded at roughly twice the national average in the first years of the new century.

    Perhaps most remarkable has been the movement of Asian immigrants into technology. In California, they account for a majority of such firms. Regions at the center of the high-tech economy — including Silicon Valley, Orange County and parts of suburban Seattle — are now heavily Asian-American. Although most of these new companies are small, some have grown sizable. The founders of Sun Microsystems, Yahoo, AST Research and Solectron are all of Asian descent — and are largely immigrants.

    This immigrant experience, says John Tu, president and co-founder of Kingston Technologies, the world’s largest independent producer of computer memory, has forced them to think differently.

    “The key thing is,” Tu said, “being an immigrant makes you flexible. … IBM, Apple and Compaq were inflexible. They told the memory customers: Take it or leave it. We thought about the customer and the relationship with the employees. I guess we didn’t know any better.”

    Yet the immigrant contribution goes beyond high-tech. In the years ahead, these new Americans, nonwhites and the “blended” population could reshape the national marketplace. Taken together, purchases by Asians, African-Americans and Native Americans, according to the Selig Center for Economic Growth at the University of Georgia, have exploded, growing far more rapidly than the national average.

    Combined with Latinos, these minorities could account for more than $2.5 trillion by 2010 — nearly one in every $4 of U.S. consumer spending.

    Perhaps nothing better illustrates these changes — and immigrants’ effect on daily life — than the shifts in that most basic of industries: food.
    In the old paradigm, ethnic groups such as Italians might cook traditional foods, like pizza, for their compatriots. Then, in a generation or two, they would reach out to the mainstream population. Meanwhile, immigrants, and particularly their children, acclimated to “American fare” like McDonald’s.

    But today, the shift from ethnic niche to mainstream is rapid. In Houston, once dominated by Southern cuisine, nearly one in three restaurants — overwhelmingly small, family-run businesses — serves Mexican or Asian cuisine. They account for more establishments than all the hamburger, barbecue and Italian restaurants put together.

    Nationwide, while pizza, hamburger and other traditional fast-food restaurants have stagnated, new chains selling quick, inexpensive Asian or Mexican food have flourished. Consider the successful Panda Express, started and owned by immigrants.

    By embracing, and being embraced by, immigrants, America can continue to build on its diversity. This allows the nation to retain its youthfulness, tap the global market and provide critical new spurs to innovation.

    America increasingly resembles Walt Whitman’s description, “not merely a nation, but a teeming Nation of nations.” The mid-21st-century United States can reflect that description — and aspiration — to our substantial long-term benefit.

    This article first appeared at Politico.

    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 Febuary, 2010.

    Photo by SEIU International

  • A Big Company Recovery?

    After the release of the 2009 fourth-quarter GDP estimate, some forecasters are now predicting a rapid recovery in 2010. Certainly, the fourth-quarter growth rate was impressive, particularly following the modest pickup reflected in the third-quarter results and the terrible results of the previous several quarters. Implicitly, these optimistic forecasts are based on the assumption that the United States economy has been fundamentally unchanged by the recession.

    I suppose an assumption that the economy has been fundamentally changed in a good way could motivate a positive forecast, but I’ve not seen anyone make that argument. If someone does, I’d like the chance to debate them. We certainly haven’t addressed the too-big-to-fail problem, the bank health issue, or Fed-induced moral hazard problem created by Greenspan’s repeated easing in response to market declines.

    On the other hand, we are promised increased regulation for many sectors and higher taxes. I’d like to know which sectors, besides legal and accounting perhaps, were the winners, and how they are poised for imminent booms.

    If the economy is unchanged, we would expect to see economic growth in small businesses, and a recovery in real estate markets and construction. I don’t see how that happens. I have a hard time seeing how the flow of capital to small businesses can be restored soon, and imagining a near-term robust real-estate and construction recovery is even harder, while foreclosures are still climbing and homeownership rates still high.

    Given these facts, most forecasts these days are, unsurprisingly, more modest. Forecasts of tepid economic growth with slow job gains are typical. Some are more pessimistic, anticipating a new slowdown brought about by increasing taxes or new financial crises.

    Certainly, the United States faces continued economic challenges. When one looks more closely at the past-two-quarter’s GDP estimates, it is difficult not to conclude that they were elevated by temporary factors, such as home-buying incentives, auto buying incentives, and inventory changes.

    Other data compel one to even less sanguine conclusions. Bank charge-offs, driven by weak real estate markets and weak economic activity, are still climbing, hitting new records every quarter. Jobs are still being lost, albeit at slower rates than those disastrous rates we saw in 2009’s first half. Residential foreclosures are still climbing. Many commercial real estate markets appear to be collapsing. Normalized TED spreads, the cost of an incremental increase in risk, are still high, implying continued risk aversion among market participants.

    The human costs of this recession have been even greater. About 15 million Americans are unemployed, over half of whom have been unemployed for 19 weeks. That doesn’t include the almost-five-million discouraged workers who have left the job market, or the over-nine million who are underemployed, involuntarily working at jobs below their capabilities or part time.

    The employment numbers are sobering, but they don’t do justice to the personal costs those without gainful work are enduring. The average unemployment duration is now about 30 weeks. Many of our new workers and long-term unemployed will never see their careers recover. Instead, they will toil at jobs below their abilities, earning lower salaries than would have been the case without the recession.

    For the rest of us, these workers represent underutilized human capital, perhaps even a financial burden. They imply slower long-term economic growth and suggest our economy has undergone a fundamental change.

    The magnitude and duration of unemployment are not the only changes we’ve seen. It appears that, for the next decade at least, the potential growth of small business has changed, for the worse.

    Many of our banks are essentially zombies, existing, but incapable of serving an economic purpose, and I see no initiative to fix the banks. Small businesses need financial intermediation to grow. They cannot grow without an active and vigorous banking sector. Big business, with its direct access to capital markets, does not need financial intermediation. It can grow without an active and vigorous banking sector.

    Big business also operates, if it is big enough, with a free insurance policy against failure. Some big businesses are not big enough to be considered too big to fail, but many of them are large enough to attract or lobby for subsidies or government protection.

    Small businesses, on the other hand, are on their own. No one insures or subsidizes small business. Few even notice when a small business fails.

    Big businesses are also likely to benefit from an increased regulatory environment. Proportionately, the compliance burden is far less for larger businesses than small businesses. Regulation often serves as a tax on entrepreneurs, but a boon for big company bureaucrats.

    Yet we cannot expect big business to rescue or re-invent the economy since they have little stake in pushing the envelope on innovation. Big businesses tend to be bureaucratic and risk averse. They do not innovate.

    However, small businesses are key to economic innovation and growth. There is a reason that the computer business is dominated by relatively young firms such as Microsoft and Google, instead of IBM. There is a reason that the old, protected, United States automobile companies couldn’t compete when the younger and more nimble, Japanese manufacturers entered the market with the higher-quality and more fuel efficient products.

    If the balance between large and small companies has been changed, fundamentally and at least semi-permanently, we are in big trouble. As our small firms are being stymied, the fundamental potential United States economic growth rate has shifted down, and the “natural” unemployment rate has shifted up. That is, we can expect slower growth and higher unemployment that we have become accustomed to in the past-unless somehow economic policy again favors entrepreneurs over corporate and government bureaucracies.

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

    Photo by Angela Radulescu

  • Midwest Success Stories

    Most observers do not associate the Midwest with urban success, but quite the opposite in fact. But while there are plenty of places that are legitimately suffering, there are also plenty of success stories out there that don’t always get the mindshare or press they deserve.

    First on my list of Midwest success stories is Des Moines, Iowa. This is a smaller,, largely under the radar city, but it has emerged as one of the strongest performers anywhere in the United States. This city defines the term “easy living”, while still managing to be home to major industries like insurance. Being smaller has proven an asset here, as Des Moines has avoided many of the large scale boondoggles like pro sports stadiums cities sometimes engage in to try to prove they are “major league”.

    Instead of competing for bragging rights, Des Moines instead has grown its job base significantly during the “lost decade” of the 2000s. Between 2001 and 2009, it added over 25,000 jobs – a healthy 8.9% clip – and boasts a close to rock bottom (for these times) 6.5% unemployment rate. Des Moines metro grew its population at 15.5% between 2000 and 2008, nearly double the national average, belying the notion that no one wants to live in Iowa. Despite this growth, labor shortages remain a long term local concern. That’s called a nice problem to have.

    Indianapolis is another standout, with a profile closer to the Sun Belt than the Rust Belt. It grew its population at a rate 50% greater than the national average, and also had strong net in-migration,with almost 65,000 net people deciding to pack up and move to Indy. Its demographic and economic stats are very comparable to Portland, Oregon, the urban policy poster child. In fact, Indianapolis actually added more jobs than Portland – where job growth has been largely in the suburban periphery – last decade thanks to an aggressive pro-business attitude and local industry clusters like life sciences, motorsports, and internet marketing.

    Indianapolis may also be the least expensive major housing market in America, but it maintains a full range of urban amenities and is only three hours drive from Chicago for those things it lacks. This is one reason Business Week just named the large suburb of Fishers the best affordable suburb in the United States. Indy has also quietly established a position as an urban innovator, with unique to the nation projects like a downtown urban trail. It is also a leader in modern roundabouts, with suburban Carmel having 5% of all the modern roundabouts in the entire United States.

    Head east on I-70 and three hours later you’ll arrive in Columbus, Ohio, Indy’s “twin city”. Like Indianapolis, an artificially chosen state capital, Columbus is thriving in a struggling state. Like Indy, it also has strong population growth and net in-migration, and a below average unemployment rate. It’s home to powerhouse Ohio State University, which boasts the nation’s largest college campus, and stunning historic neighborhoods like German Village. Columbus is home to a thriving LGBT community, and the second largest gay pride parade in the Midwest after Chicago, one of the top ten in the country, attracting over 100,000 attendees.

    West along I-70 is Kansas City. Described as a “zone of sanity”, Kansas City avoided the housing boom and thus largely the bust, remaining another affordable and attractive place to live. It too has had strong population growth and net in-migration, along with below average unemployment. The city is the second largest rail hub in the United States after Chicago, but lacks that city’s legendary rail congestion. Unsurprisingly, rail carriers are investing heavily there. With rail connectivity to Mexican ports, and sitting along I-35, Kansas City is looking to be one of the winners of NAFTA. Plentiful fountains and miles of lush parkways make Kansas City a lovely city. It is also a cultural hub, with the respected Nelson-Aktins Museum at the high end and the thriving Crossroads Art District on the grass roots side.

    Madison, Wisconsin is one of the rare Midwest cities that actually gets national respect. Its location along a narrow isthmus creates a charming physical setting and compact urban core. Home to the University of Wisconsin, its progressive credentials are unimpeachable. But it is also an economic success story, with strong job growth of 6.6% from 2001-2009, along with impressive population growth. Part of this is the university’s powerhouse researchers, who attracted the likes of Google to open an office. The city is also the state capital. Despite being a smaller city, it boasts amenities worthy of America’s elite metropolises, including super-high end denim retailer Context Clothing and the luxurious Candinas Chocolatier.

    Despite its reputation for frigid weather and its geographically peripheral location, Minneapolis-St. Paul offers both economic strength and high quality of life. Its residents embrace the recreational opportunities provided by numerous nearby lakes, including several inside the Minneapolis city limits, as well as the winter. The region was early to the starchitect game, with Frank Gehry designing the metallic Weisman Art Center before the Bilbao Guggenheim. But it’s not all fun and games there. The region has an unemployment rate well below average and a GDP per capita well above it. It is home to numerous household name firms like Target, Best Buy, and 3M. And it is a center for the medical device industry.

    These six cities show that there’s a lot more to the Midwest than rusted steel mills, shuttered auto plants, and abandoned houses. It is also home to healthy cities and thriving suburban communities that are outpacing the nation demographically and economically. These places offer affordability and a high quality of life, but still manage to feature many more urban amenities and innovations than commonly assumed. These characteristics make them well-positioned to be among the urban winners in the 21st century.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.

    Photo by Carl Van Rooy (vanrooy_13)

  • America in 2050 — Strength in Diversity

    An ongoing source of strength for the United States over the next 40 years will be its openness to immigration. Indeed, more than most of its chief global rivals, the U.S. will be reshaped and re-energized by an increasing racial and ethnic diversity.

    These demographic changes will affect America’s relations with the rest of the world. The United States likely will remain militarily pre-eminent, but the future United States will function as a unique “multiracial” superpower with deep familial and cultural ties to the rest of the world.

    No Clear Majority

    The United States of 2050 will look very different from the country that existed just a decade ago, at the dawn of the new millennium. Between 2000 and 2050, the vast majority of America’s net population growth will come from racial minorities, particularly Asians and Hispanics, as well as a growing mixed-race population.

    By the middle of the 21st century, America will have no clear “majority” race. Today 30 percent of the U.S. population is nonwhite; in 2050 it may be nearly 50 percent. Latino and Asian populations are expected to triple. Today, because of high Latino birthrates, one in five American children under the age of 5 is Hispanic; increasingly most Hispanic growth will come from the children of those born in America.

    More Multiracial

    At the same time, these varying groups, and particularly their children, will become ever more multiracial in their outlook. The percentage of Americans of mixed race is growing significantly among people under 18; in California and Nevada mixed-marriage rates are at more than 13 percent, and in the rest of the Southwest a heavily Latino population increasingly intermarries with other ethnic groups.

    We will see more of this kind of interracial pairing in the future. According to market research firm Teen Research Unlimited, 60 percent of American teens say they have friends of different ethnic backgrounds. Even more telling, a 2006 Gallup Poll showed that 95 percent of young people (ages 18 to 29) approved of interracial dating — compared with only 45 percent of respondents over the age of 64. Likewise, a USA Today/Gallup Poll conducted in 2008 among teens showed that 57 percent have dated someone of another race or ethnic group, up 40 percent from when Gallup last polled teens on the question back in 1980.

    More Immigrants

    Europe also will continue to be a source of immigrants as many talented young Europeans continue to escape the continental nursing home by heading to the United States. But by far the largest groups of immigrants to the U.S. will come from Latin America, Africa, China and other developing countries. The United Nations estimates that 2 million people will move to developed countries annually until 2050, and more than half will come to the United States.

    Some of best educated and most successful, of course, will then go back home, as has been case throughout most of American history. But many more will stay, often for very mundane reasons, such as the chance to live in a dwelling larger than a shoebox or to have more than one child. Others will cherish the chance to live without worrying about the depredations of some party bureaucrat, caudillo or religious fanatic. These immigrants are not seeking a spot on the Titanic. They realize that, despite its many failings, America is uniquely able to reinvent and re-energize itself.

    Changing Landscape

    This greater diversity will become increasingly evident across an expanding landscape, including many once homogeneous areas like the Great Plains.

    But the new epicenter for diversity will lie in the once overwhelmingly white suburbs, which now increasingly are settled by minorities and immigrants. An absolute majority of our foreign-born population now lives in suburbia, up from 44 percent in 1980.

    Already the best places to find ethnic shopping complexes, Hindu temples and new mosques are not in the teeming cities but in the outer suburbs of places like Los Angeles, New York and Houston. In most immigrant-rich suburbs, you find alongside the temples and mosques churches and synagogues.

    Unique in the World

    In contrast to this growing diversity, the United States’ chief global rivals seem far less able to accommodate this level of interracial mixing. China, Japan and Korea are culturally resistant to diversity and unlikely to welcome large-scale immigration, even if much of their labor force has to go to work in walkers and wheelchairs.

    Given Europe’s current considerable problems integrating its immigrants, particularly Muslims, the continent seems ill disposed to open its doors further; Denmark and the Netherlands are considering measures to sharply restrict immigration.

    Economic Benefits

    The changing ethnic population in the U.S. will no doubt play a leading role in the next economic transition.

    Recent newcomers have already distinguished themselves as entrepreneurs, forming businesses from street-level bodegas to the most sophisticated technology companies. Between 1990 and 2005 immigrants started one-quarter of all venture-backed public companies.

    Large American companies are also increasingly led by people with roots in foreign countries, including 14 of the CEOs of the 2007 Fortune 100. Even corporate America — once the almost-exclusive reserve of native-born Anglo-Saxons — will become as post-ethnic as the larger society.

    The America of 2050 will seem, to some, a very different and even foreign country. Yet our continuing racial evolution confirms the basic dynamism of our society and its ability to adapt. Our experiment with creating what Walt Whitman in 1855 described as “the race of races” will represent one of the great accomplishments of mid-21st century America.

    This article originally appeared at AOLNews.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 Febuary, 2010.

    Photo: chrisjfry

  • Scenario Two: An Optimistic view of the United States future

    This is the second in a two part series exploring a pessimistic and an optimistic future for the United States. Part One appeared yesterday.

    A positive assessment of US prospects rests on at least seven propositions. First, the current crisis is not inherently more threatening than many others, most notably the Civil War, the Great Depression, and two World Wars. Quality leadership, building on the resilient political and economic institutions of the country, will prove sufficient to bring about needed sacrifices and transformations. We have seen this many times in the past from the Progressive Era to the New Deal, the Second World War and the winning of the Cold War, which was a uniquely bipartisan triumph.

    Second, despite the ongoing problems of racial inequality and tensions about immigration, the United States has been uniquely successful in having peacefully achieved a truly multi-racial and multi-ethnic state. It has welcomed waves of diverse immigrants, and integrated them into a broader, ever changing society. This process has culminated symbolically and literally in the election of a multi-racial president, Barack Obama.

    Third, economic corruption and financial crises have been recurring phenomena, and the nation has emerged out of these because of the sheer magnitude of talent and natural resources. This has been aided by a deep entrepreneurial capacity and willingness to take risks, and, overall, a willingness of most to work hard to improve life for themselves and their families.

    Fourth is the existence of a large and literate population, willing to work, certainly the world’s finest university system and research establishment, over and over again engendering innovations that create future economies: e.g., the computer revolution. American secondary education is still in need of great improvement, but the US University remains a beacon to talent from around the world.

    Fifth, despite the noise and uproar, despite the continuing clash between the traditional and the modern or secular, the nation, through its independent courts and helped by governmental decentralization, e.g. the Federal system, the country remains the freest society in human history. Despite the appearance of power of the religious right under the Republicans since the 1970s, serious erosion in freedom of thought has been kept to a minimum. Similarly, the cult of political correctness, although annoying, has become, if anything, less potent and increasingly the butt of jokes.

    Sixth, and perhaps most important, we have to consider demography. Despite current unemployment and despite the imminent retirement of the baby boomer generation, the United States, alone among the richest economies, will continue to have a relatively favorable ratio of wage earners to the elderly. This will enable us to afford social security and Medicare. The new generation – known as millennials – will constitute a large source of new labor, innovation and entrepreneurs needed to propel our economy.

    Finally, there are a few positive trends, including modest recovery in housing and in auto sales, hints of some pulling back from the out-sourcing of services, and continuing innovation and marketing of new products and services. On the political side, although the current anti-incumbent mood will likely reduce Democratic margins in Congress and in several states in 2010, the sheer lunacy of the “tea party“ activists, many of them unreconstructed “know nothings” may actually hurt the Republican party more than the Democrats. People are constantly being reminded why, for all the failings of the Democrats, they tossed the Republicans from power in the first place.

    An optimistic scenario rests on the historical precedent of muddling through crises and then creating new waves of innovation in products and services, and on the presence of a large labor force willing and able to work. A vital question is whether the President and Congress will have the courage to ask voters to make short-term sacrifices: higher income taxes on the rich and reduced subsidies to entrenched interests across the board that will be needed to restore fiscal health. And finally there is the big question, are the American people ready to do with less today to build a better future for the next generation?

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist).

    Photo: elycefeliz

  • Scenario One: A Pessimistic Forecast for the United States

    This is the first in a two part series exploring a pessimistic and an optimistic future for the United States. Part Two will appear tomorrow.

    I’m an old (76) 1950s type liberal, and have lived to see the election on the nation’s first mixed-race president, as well as some remarkable social change in the general status of women and ethnic minorities. The United States has a remarkable heritage of entrepreneurship and resilience in its democratic institutions. Yet there are cogent reasons to be fearful and pessimistic about our capacity to maintain our preeminence, at least in the medium run (10-15 years). I obviously hope I’m wrong, and look forward to attempts to undermine my thesis – including, tomorrow, my own.

    Consider the numbers 17, 49 and 60. Seventeen is the real unemployment rate, not the “official” ten, when we take into account those dropping out of the labor force, or giving up. Forty-nine is the real percentage of home ownership, in our “ownership” society, not the 68 percent from the census. For mighty Los Angeles, the real number is 44 percent. The difference is the stupendous number of households whose equity in the house is less than they owe on the mortgage. This house of cards has increasingly been the engine of national growth. Sixty is the number of votes in the US Senate needed to stop a filibuster, and together with inept leadership, is responsible for the absurd failure of Congress and the effective collapse of collegial democracy.

    Economists say we are in a recovery. What recovery? The small increase in house sales is due to temporary incentives, but including speculators buying up homes, many foreclosed, for yet greater inequality. The main gains in jobs, not fully offsetting wider losses, are in temporary construction tied to government-funded projects. The growth in jobs and the economy in the last 20 years has been in services, stuff we do for each other, and the main fuel has been the pyramiding of house values. That is over. How can we restore growth through more consumption if the majority of the population no longer has the resources to invest or spend?

    By far the most destructive accomplishment of almost 30 years of restructuring has been the reestablishment of extreme inequality, the emergence and power of the ultra-rich, both “progressive” and conservative in orientation, to levels last seen before the Great Depression.

    But perhaps the greater root of our malaise, and perhaps the downfall of the American Empire, lies in excessive globalization and the loss of our capacity to make stuff, the outsourcing of, first, manufacturing and now even of services. It is instructive that this is the same story of imperial Rome, although long dependent on its empire, by the time of its collapse it imported virtually everything from its tributary states. Its finances could no longer pay the Army which was largely made up of people from outside Italy.

    I’d agree that the main hope in the economic arena is via the small entrepreneur, but they face the immense monopolistic power of ever-larger global capital. I’m proud to live in Seattle, which at least dared to fight back, as in the one and only US general strike, in 1919, and in the WTO protests in 1999. Perhaps this is not so surprising since Seattle still makes things: planes (Boeing), ships (Todd) and trucks (PACCAR).

    The saddest irony is that even as maybe half of us celebrate a Black president, we have utterly failed to follow up on the political civil rights gains on the 1960s to incorporate Black Americans into the mainstream economy. The status of the Black male is, relatively, worse in 2009 than it was in 1969. I would not be surprised to see a reprise of the 1960s race riots. But it is also relevant to reflect on the declining state of the white male, suffering increased drop-out rates from high school, declining enrollments in college, all in the face of reduced job opportunities for the less skilled and educated, plus competition from immigrants, legal and illegal. Is it any wonder that both nativism and populism is rising anew?

    One might dare to believe that large Democratic majorities in Congress would give us hope for effective responses to this national malaise. But I’d say the current Congress rivals the infamous 80th congress that Harry Truman excoriated, for its “do nothingness”. On the surface we can correctly observe that the Republican party, increasingly conservative, is more than willing to wreck the country in order to regain power.

    But part of the problem is that we no longer have a conservative and a liberal party, in an economic sense. We have two bourgeois parties, with the “new” Democratic Party increasingly dependent on the wealthy educated elite as well as well-paid public workers, it long ago abandoned the working class and did nothing to constrain globalization and the rise of the toxic financial practices. Thus we should not be surprised that the populist know-nothing uprising could bring to power large numbers of proudly uneducated folks.

    In the final analysis for this pessimistic scenario, the underlying culprit is the inexcusable failure of the US educational establishment, the astounding incapacity of our public and private schools to teach people to think and reason. And part of the reason for this incapacity is the excessive power of religion, which values belief over reason, in our culture. And this is why decadent Europe – aging and tax-burdened – could come out of this recession and malaise better than the United States. Perhaps we’ll see a reverse migration of surplus underemployed young Americans returning to their aging historic motherlands!

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist).

    Photo: hz536n

  • Jerry Brown: Machiavelli Or Torquemada?

    For more than one-third of a century Jerry Brown has proved one of the most interesting and original figures in American politics–and the 71-year-old former wunderkind might be back in office in 2010. If he indeed wins California’s gubernatorial election, the results could range from somewhat positive to positively disastrous.

    Brown is a multi-faceted man, but in political terms he has a dual personality, split between two very different Catholic figures from the 15th century: Machiavelli and Tomas de Torquemada. For the sake of California, we better hope that he follows the pragmatism espoused by the Italian author more than the stern visage of the Grand Inquisitor.

    Like a good Jesuit, Brown certainly can be flexible. Back in 1978, for example, he worked against Howard Jarvis’ Proposition 13, which capped real estate taxes. But once the measure was passed, Brown embraced it as his own. Indeed, he was so enthusiastic about the tax-cutting measure that Jarvis actually voted for Brown’s re-election late that same year. A month after the vote a Los Angeles Times poll revealed most Californians thought Brown actually supported 13.

    Brown also has shown his flexibility by throwing even loyal allies under the bus. Elected largely due to the electoral coalition constructed by his father, Edmund G. “Pat” Brown, Brown made a point of tweaking and restraining the expanding bureaucracy largely created by his father. He also took on the University of California and the welfare bureaucracy as well as agriculture, residential real estate and manufacturing giants.

    This Oedipal battle reflected Brown’s personal crankiness. He came into office, recalled top aide Tom Quinn, “questioning the values of the Democratic Party.”

    Ascetic and even monk-like, he rejected his father’s “build, build, build” philosophy and embraced E. F. Schumacher’s “small is beautiful” ideology. Like the 15th-century Florentine Catholic monk Girolamo Savanarola, he came to rid Sacramento of suberbia and luxuria.

    Brown was also ahead of his time. His early embrace of green politics–particularly energy conservation and renewable fuels–foreshadowed that of later Democrats, particularly Barack Obama. His strong outreach to Latinos and other minorities expanded his political base among California’s fastest-growing populations.

    Yet Brown understood that economic prosperity–not civil rights or environmental zealotry–was key to political ascendancy. Eastern journalists dismissed him as “Governor Moonbeam,” but they ignored his Machiavellian skill in recognizing and reaching out to rising economic forces, notably the high-tech entrepreneurs in the Silicon Valley and across Southern California. The growth of this sector, along with rising trade with Asia and the military boom after the Soviet invasion of Afghanistan, set the pace for the state’s strong rebound from its early 1970s doldrums.

    But Brown’s inquisitorial side surfaced again as he prepared a second run–he had made a charmingly eccentric assault in 1976–for the White House. Perhaps the prospect of facing a man of infinite flexibility, Bill Clinton, pushed him over the top, but Brown re-invented himself as a high-octane and, at times, shrill populist.

    After some years in the political wilderness, he reemerged in 1998 as Mayor of Oakland, a tough job even in good times. Although he remained predictably arrogant and aloof, the job of managing a working-class city seemed to have brought him to his senses. Like the ideal politician in The Prince, Brown governed with something approaching strategic precision, pushing economic development, embracing the police and supporting new infrastructure spending.

    Brown’s newfound reputation as a canny realist helped him win the election as attorney general in 2006. Yet once back in statewide politics, the inquisitorial side found expression. Convinced about the impending threat of global warming, Brown used his new powers to push the Gorite agenda with the passion of a Torquemada.

    Although Brown was not quite torturing heretics, he certainly applied the legal equivalent of thumbscrews to anyone–developers, cities, counties–who did not follow his prescriptions about “carbon neutrality.” Even proposals for sensible, relatively dense “in fill” development were turned aside in favor of utopian, economically unsustainable ideas about forced density and transit friendliness.

    Today, with California’s economy is in tatters–its unemployment well over 12%–and Brown’s crusade seems likely to make it worse. Onerous regulation threatens everything from the construction of new single-family homes to new employment tied to anything that releases demon carbon–including manufacturing, oil drilling and large-scale agriculture.

    All this has made Brown widely feared in much of California’s fractured, traumatized business community. Even worse, he has emerged as the standard-bearer of the public employee unions, the very force whose political power and pensions are bringing the state to the verge of economic ruin. The fact that Brown’s campaign is funded largely by these unions makes it, at least on the surface, unlikely to challenge the hegemony of our putative “civil servants.” They are said to be ready to spend up to $40 million on “independent” campaigns to help beat back any chance of a GOP victory.

    This is worrisome given Brown’s role in fostering the expansion of public-sector unions during his term, a group whose ascendancy has become arguably the single biggest factor in the state’s precipitous decline during his last gubernatorial reign. As author Steven Greenhut has pointed out, unfunded pension liabilities in excess of $50 billion are one key element driving the state toward ever more depressed bond ratings and possible bankruptcy.

    Under normal circumstances, Brown’s ties to the public sector, his fickle nature and his dubious accomplishments would spell political doom. But amazingly, Brown’s long, if mixed, record might actually prove an advantage against his most likely opponent, former eBay executive Meg Whitman, who is running as an outsider.

    The problem for Whitman or any GOP candidate lies with the miserable legacy of another nominally Republican outsider, Arnold Schwarzenegger. The Terminator’s record of ineptitude and empty blather stands as a mega-advertisement against inexperience. Compared to the former body builder’s amateurish blundering, Brown’s wealth of knowledge of government looks appealing.

    Whitman, or her main challenger Insurance Commissioner Steve Poizner, also must struggle with a Republican Party out of sync with an increasingly multi-racial and socially liberal state. As long-time political analyst Allan Hoffenblum notes, for the first time there is not one congressional, state senate or assembly district with a GOP majority.

    So in the end, California’s fate may end up resting on which Jerry Brown emerges after the election. If he continues on his inquisitorial assault on carbon-creators, you can pretty much expect California’s middle class to continue diminishing while the state’s aspirational appeal ebbs ever further. The state could end up resembling Kevin Starr’s description of his native San Francisco– “a cross between Carmel and Calcutta.”

    But given his history, Brown could still surprise us. Stuck with responsibility for a decaying economy and fiscally burdened by the voracious public unions, Brown could do a “Nixon in China,” imposing controls on pensions and salaries. He could recognize that “green jobs” can not save California from the abyss and that a new “era of limits” must apply to the public sector as well as the rest of us. With the passionate climate-change constituency shrinking, he might even decide to accept a modicum of carbon heresy as a necessary evil.

    Brown should heed Machiavelli’s advice for rulers to be “merciful and not cruel” and “proceed in a temperate manner with prudence and humanity.” If in his old age Brown adopts the Italian writer’s credo of tactical flexibility, reason and tolerance, the Golden State may yet revive itself, and with it restore the legacy of its most storied political family.

    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 Febuary, 2010.

    Photo: Troy Holden

  • Newspapers: The Search for A Killer Saviour

    The publishers and staffs of many daily newspapers would love to think of themselves as hip bloggers, tweeting to an eager and mobile public. But the reality is that newspapering came of age with railroads and steel mills, and the balance sheets of many companies are heavy with long-term debt, inflated valuations, unfunded pension liabilities, and the usual write-downs of smokestack America.

    It does not take a degree from Harvard Business School or a partnership at McKinsey to explain why newspapers and many magazines are struggling: readers don’t want to pay for anything, and advertisers, as was said of Chicago Bears owner George Hallas, “throw nickels around like manhole covers.”

    Newspaper companies cling to the illusion that Amazon’s Kindle reader or perhaps the Apple iPad will give the industry a killer technology that will allow readers to surf for news and the companies to collect money for providing it. But even charging four dollars a month to deliver an electronic file to subscribers probably does not cover the pension, salary, and real estate costs that are associated with old media. (The new headquarters of the New York Times has a birch forest in the lobby.)

    Which brings us to one of the more absurd suggestions of the recent stimulus debate: the consideration that newspapers might themselves be in line for some bailout money, in the interests of maintaining a free press and a vibrant democracy. Maybe taxpayers could check a box indicating whether they want to save the Detroit Free Press, the city of Detroit, or just General Motors?

    Everyone has their own theories on why newspapers are failing — internet pricing models, to postage rates, and the cost of paper — but mine center on the written content. Many daily papers have read for years like a variation on a collection of press releases.

    Too often, articles are self-serving political messages out of Washington, or based on anonymous and biased sources. For readers, there’s no recourse in the cases where the paper has got things wrong. Is it any wonder that they’ve migrated to vibrant, interactive Web sites?

    For models of editorial salvation, newspapers should look to the formulas that allowed them to prosper in the first place, and serve as showcases for lively local coverage and debates, with writing that comes from correspondents in the true sense of the word: letter writers.

    Many newspapers confine their opinion sections to two pages, and then fill up the rest of the paper with stale news which today’s readers know by the time they stumble to the front porch. Add to that the celebrity-driven features (“Dateline Bradgelina” or “Tiger Hunting”).

    Most newspaper readers of my acquaintance have reversed their reading habits, and now start with the opinion columns and the letters-to-the-editor, and then glance over the news headlines. Why not fill a newspaper with what the readers look for and enjoy? Would it not be a pleasure to read twenty columnists, not simply three or four?

    Needless to say, newspapers are run for their shareholders, and investors take more pleasure in full-page ads than in lively or argumentative columns. But in my mind, a newspapers run and financed by the readers, and not by corporate hierarchs, could succeed financially. If you are looking for a working model, think of a privately-funded university or even a mutual savings bank (one owned by its depositors).

    Under these models, a newspaper would have revenue (more like tuition) from subscribers, its own capital (assuming any is left), advertising (but it would not be the lifeblood, as is the case now), and contributions (fund raising campaigns).

    With whatever money is available annually to the editors, they would produce a newspaper that most closely matches the charter of the association or trust. It could report on local news, support Democrats or Republicans, devote itself to sports or foreign reporting, or cover the arts or fashion. That would be for the reader-members to decide.

    In the current market, readers own few newspapers. Since 1936 a trust has owned the Guardian (London), which may explain its consistent editorial independence and the high quality of its writing. That said, the Guardian loses money annually, and the trust needs third-party assets to make up the losses.

    Similarly, the ownership structure of The Economist, via several classes of its shares, insures that the magazine (technically it calls itself a newspaper) reports to a board of trustees, rather than to its shareholders, to insure editorial independence. In 2009, when the rest of the industry was looking for a handout, The Economist increased its worldwide circulation (by 6.4 %) to 1.4 million, its revenue (by 17 %), and its profits (by 26 %, to £56 million).

    Nor could anyone accuse The Economist editors of dumbing down the product, given the publication’s relentless coverage of foreign affairs, finance, business, and economics. By comparison, the New York Post reportedly loses about $50 million a year for Rupert Murdoch. So much for pandering.

    The problem for many large American newspapers—such as the New York Times—is that, while operating profits shrink, they are hoping to whistle past all sorts of electronic graveyards. In the last decade, for example, the Times squandered more than $2 billion to buyback its own overpriced shares rather than pay down debt or find a model that would sustain the paper in the age of what George W. Bush called “the Internets.”

    Now it faces falling advertising, dropping circulation, higher paper and delivery costs, unfunded pension liabilities, and convertible debt and warrants due to a Mexican oligarch. Meanwhile, its competition is the ethereal and cost-free World Wide Web.

    Regarding so called “pay walls” — the idea of charging Internet readers, lately embraced by the Times — columnist Michael Kinsley has written: “Every English-language paper published anywhere in the world is now in competition with every other. Competition is what has driven the price down to zero and kept it there.”

    The same points are made in “The Curse of the Mogul” by Jonathan A. Knee, Bruce C. Greenwald, and Ava Seave, authors affiliated with Columbia University who make the point that “the Internet may be somebody’s friend — most notably, the consumers of media — but it is not the friend of incumbent media companies.” They believe that only those print franchises with a locally dominate position will make it, writing “…if print newspapers are to survive, it will be through single-minded focus on the only area of coverage in which they have an advantage.”

    Their thesis on “what’s wrong with the world’s leading media companies” is that the dealmakers behind many companies made a string of terrible acquisitions that have wiped away $200 billion in shareholder value. (The Times contributed $1 billion to this figure, when it had to write down its investment in the Boston Globe.)

    Will I miss the morning newspaper as we knew it? Not very much, I confess. I grew up in a world of monopoly-voice journalism, where getting a letter to the editor of the New York Times printed was not unlike receiving a papal indulgence.

    As for regional or small town papers that only publish hints from Heloise or boosterism for local teams: have you ever spent a Saturday morning with the Bangor Daily News or the Kansas City Star? It strikes me that many American newspapers bailed out years ago.

    Does anyone out there have a formula that will save the traditional daily? I didn’t think so. If you did, instead of reading this online, you would be in a closed-door conference with the publisher of the New York Times or the Baltimore Sun, explaining how web-site hits or those Pulitzer Prizes from 1987 can be transmuted into gold.

    Matthew Stevenson is author of the recently published Remembering the Twentieth Century Limited. He lives in Europe.