New Geography

Category: Economics

  • Nurturing Employment Recovery

    President Obama’s quick exit from Oslo and late arrival in Copenhagen suggest he’s finally ready to shift focus from Nordic adulation and fighting climate change and diplomacy to fixing the American economy. About time. As former Clinton adviser Bill Galston observed recently, the president needs “to pivot and make 2010 the year of jobs.”

    White House operatives, as well as the Democrats in Congress, know high unemployment could bring big political trouble next year. But in their rush to create new jobs, policy makers would do well to focus on the quality of jobs created over the next year and beyond.

    On this score, the slight improvements in the job picture are far from sufficient. The most recent analysis of employment over the past year by the Web site JobBait shows that almost all the growth has occurred in three fields–government, education and health care.

    The problem: All these fields are financed by taxpayers or through transfer payments. They do little to expand our exports, and they employ few of the blue- collar male workers who have been hardest hit by the “hecession.”

    Unemployment for men is over 2.5% higher than for women, the largest gap in history. In all but a handful of states, male-dominated fields such as transportation, mining and logging, manufacturing and warehousing have declined rapidly over the past year. The only states to experience gains were North Dakota, Montana and West Virginia.

    This reflects the critical weakness in the stimulus package. The stimulus focused on government bailouts and transfers of research funds to universities, while less than 5% went to basic infrastructure. But a greater emphasis on infrastructure would not only have created large numbers of construction jobs, it would have boosted our industrial competitiveness by eliminating bottlenecks in our transportation system.

    The only big regional beneficiary of expanding government employment has been, unsurprisingly, the Washington Beltway. Indeed, the number of federal bureaucrats making $100,000 or more jumped from 14% to 19% since the recession–and that’s $100,000 before overtime and bonuses.

    Elsewhere, the surge of government employment is petering out, particularly on the state and municipal levels. These jurisdictions are running out of money, since they are unable to print their own. Over the past year government jobs contracted in financially strapped states like California, Oregon, Michigan and Florida, as well as throughout the Northeast and New England. There’s little hope for much improvement in 2010.

    The other two sectors to enjoy significant growth have been education and health. Yet these fields do not seem to generate the broad-based economic growth needed to boost the overall economy. The region most often favorably linked with the “eds and meds” economy, Pittsburgh, has produced only modest, below-average job growth over the past generation. In fact, Pittsburgh has looked successful largely because the region has continued to hemorrhage its population to other regions, and it attracts few foreign immigrants.

    Yet the fiscal damage from dependence on public and nonprofit employment has been enormous. The city suffers a billion-dollar unfunded pension liability, among the highest in the nation on a per-capita basis. Due to the heavy local presence of institutions of higher education, nonprofits and hospitals, who keep about 40% of Pittsburgh’s property remains tax-exempt. In a sign of desperation Mayor Luke Ravenstahl recently proposed taxing tuition at local colleges and universities, eliciting outrage from the academic world.

    More important, the Pittsburgh “eds and meds” model can’t really be applied to a country whose workforce will expand by roughly 1 million annually over the next decade. The country now has fewer jobs than it had in March 2000, even though the labor force has grown by 12.1 million workers. There is no way we can produce enough growth depending on sectors that feed off taxpayers and private enterprise.

    This shortfall will be particularly tough on millenials as they enter their 20s and 30s. Already those 18 to 24 now have an unemployment rate over 18%. Not surprisingly, as Morley Winograd and Mike Hais observe, lack of jobs now stands as the No. 1 concern for those under 30.

    Another problem: We are now producing many more educated workers than we can gainfully employ. Information jobs may not be disappearing at the rate of industrial ones, but they have lost nearly 3 million positions since 1999. One likely result has been that returns to education–hyped by academics and “progressive” economists–have been dropping, particularly for younger workers. The unemployment rate for recent college grads is currently 10.6%, a record high.

    So, how to create opportunities that pay well? Some place their hopes in either the “green” or “creative” economies. But the green sector has been notably ineffective in sparking growth across other parts of the economy. A much-hyped report issued by California green-boosters bragged “green jobs”–which included everything from public relations representatives to marketing managers, accountants and brick-layers–account for something like 1% of employment. Even with heavy subsidies by taxpayers, the “green” sector seems unlikely to rescue an economy with 12.5% unemployment.

    Many politicians, particularly California’s increasingly delusional governor, also fail to recognize the cost that the “green agenda” exacts on a struggling economy. A draft report by a state advisory committee estimates California’s new draconian greenhouse gas laws could cost the state economy over $143 billion over the next decade. Efforts to spread this kind of regulation–either through federal legislation or EPA directives–would inflict similar pain to economies beyond the Sierra Nevada.

    As for the much ballyhooed “creative” sector, video producers, financial analysts, architects and other workers in the non-tangible economy are less susceptible to green pressures than factory workers, truckers or farmers. Yet as the JobBait report shows, information, business and professional services haven’t fared well over the past year. So far the only winners in professional and business services are in small states: New Mexico, Utah, South Carolina and, once again, West Virginia.

    Perhaps it’s time to abandon the notion that the U.S. can rely on preferred sectors–“green”, creative or “eds or meds”–to turn around our vast economy. Theorists often forget the essential ties that exist between tangible and intangible sectors. The strongest growth in high-end services are usually propelled by growth in tangible industries, such as energy, agriculture or manufacturing. When those industries tank, as in much of the upper Midwest, high-end services decline with them.

    Green jobs, too, require a strong economy. It is not by mistake that the big cities with the largest numbers of new “green” construction projects are not in Portland, San Francisco or other eco-capitals, but in more robust, if less organically obsessed places like Dallas and Houston. To create green jobs, you need to have growth, particularly in “hard” industries like construction and manufacturing.

    Instead of favoring certain sectors, the administration’s job “pivot” needs to focus across all economic sectors. This can be done in a pragmatic non-ideological manner. It could combine the increase in infrastructure and scientific research spending favored by many on the left with more market-friendly approaches–industrial tax credits and streamlining some regulatory standards–associated with conservatives.

    In the end the goal of policy should not be just to create more jobs, but to nurture employment that will make our economy stronger and more competitive over time. Until that happens, the recovery will create an economy fundamentally unable to sustain itself in an ever more competitive global environment.

    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 next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.

  • What To Look For In Healthcare Reform: Location, Location, Location

    A Reuters article that was widely picked up around the globe recently raised the question, Are Doctors What Ails US Healthcare? Comparing the New York suburb of White Plains to Bakersfield, California, the article uses the evergreen two-Americas paradigm to discuss disparities in health care. Drawing heavily on the Dartmouth Atlas of Healthcare, it highlights a sad but inescapable fact: doctors want to live in some places and not in others, giving the “have” populations more intensive medical care which they might or might not need, while have-nots, who tend to be older, sicker and poorer, get health care to match. The article asserts that there’s nothing in current health care reform legislation that will do anything to address the disparities.

    I agree. But then, what should we expect? The legislation, which I find marginally more desirable than doing nothing at all, is largely about insurance, not about health care. This is what happens when we emphasize how we pay for something, rather than what we are paying for. Are doctors what ails U.S. health care? Only in the sense that they are operating on the same basis as everyone else in the health care market: every man for himself.

    You don’t have to make bi-coastal comparisons to find the disparities highlighted in the Reuters article. My own Hudson Valley not-for-profit insurance company faces them every day. We cover the Medicaid populations from the aforementioned White Plains, NY, to the South, to the blighted economies of the Catskills to the North and West. The distance involved is only about 150 miles, but day in, day out it might as well be 1500. And socially, it might as well be 150 years. Sullivan County is still organized geographically the way it developed in the eighteenth and nineteenth centuries — farms, woods, and mills, only without the mill jobs.

    There was a brief shining moment (well, half a century) when urban Jews and other vacationers formed the basis of a thriving tourist trade in the “Borscht Belt” resorts of Monticello, Sullivan County’s hot spot. When they closed, they provided ideal settings for residential drug and alcohol rehab for poor people from New York City, but those aren’t exactly the foundation for high-quality community health care. When we initially started offering state-sponsored insurance to the poor of Sullivan County, the historical dearth of specialists made it a laboratory for what a free market looks like when there’s no competition. (Do I hear the words “strong public option”?) Because New York State requires us to have a decent network of contracted doctors for our enrollees, the sole cosmetic surgeon – for example – could extract pretty much any fee he wanted from us in exchange for seeing a patient who needed emergency reconstructive surgery.

    Your tax dollars meet supply and demand and a mandate to pay within a private market.

    I don’t blame the specialists. They are highly trained and skilled, and have paid their dues. If I blame anyone, it’s the system that sets the dues so high, in the form of college and medical school loans and years of fellowships that leave well-meaning doctors feeling that they deserve all that money, just like corporate farmers and hedge fund managers.

    It’s also not the doctors’ fault that they want good schools and cultural amenities. I haven’t seen much of Bakersfield, but I know that schools in and around White Plains have good reputations and are just twenty miles from Broadway and the Metropolitan Museum (and ten miles from my Tarrytown office). Maybe we can fix schools and reinvigorate the National Endowment for the Arts to make every remote locale more like Westchester, but that would be socialism.

    Dartmouth Atlas data is easily available online, and well worth spending some time with. You can use it to create all kinds of two-America scenarios that provide instant object lessons in our health care inequities. My personal favorite is that health care spending in Miami, Florida for Medicare patients in the last two years of life (highest in the nation) is exactly twice that in Portland, Oregon (lowest of the regions studied), with commensurate volumes of appointments, referrals, tests and hospitalizations, and no better outcomes. Here we see the same dynamics that make pawnshops spring up around gambling casinos and candy stores near public schools. Doctors go where the customers are, and once they arrive they maximize their revenues and measure success by volume, not outcomes.

    Why should we expect anything different, when reform legislation is captive to the same kind of have/have not dichotomy that shapes health care delivery itself? Senators Max Baucus of Montana and Kent Conrad of North Dakota are two of the pillars of the anti-public option caucus. They come from states with small populations, and both take barrels of money from the health insurance industry because they can’t raise it locally. If they play their cards right, who knows? They could leave Congress and become haves themselves, like Billy Tauzin, who is now Big Pharma’s man in Washington, having engineered the passage of Medicare Part D, or Tom Daschle, once a champion of single payer, who now plays both sides of the street with special interest money.

    Are Doctors What Ails US Healthcare? quotes David Goodman, Director of Health Policy Research at the Dartmouth Institute for Health Policy and Clinical Practice, who says there’s an “irrational distribution” of the most valuable and expensive U.S. health care resources. I would say that the distribution is entirely rational given the insanity of the larger situation.

    If we’re ever going to find our way out of this mess, we’re going to have to do for these health care backwaters, both rural and urban, what we used to do when private capital wouldn’t do the job. Set goals and build the infrastructure to serve them, because the market won’t do it. Want to electrify Appalachia? You need the TVA. Want to make the desert bloom? Build dams and aqueducts. Want to open up the interior of the country? Build an Interstate Highway system. Want doctors to practice in unattractive markets? Create an MD Bill for doctors like the old GI Bill for veterans, so that doctors emerge from training feeling more like public servants and less like indentured servants.

    I attended a discussion of health care reform not long ago at the Yale School of Public Health. The representative of the private health insurance industry put the issues in a compelling perspective, although not, perhaps, for the reasons he cited.

    His arguments were three: First, we require automobile owners to carry insurance, so requiring everyone to carry health insurance shouldn’t be a problem (I know that President Obama made this point, too, and I hated him for it). Second, do you want a health care system that runs like the Post Office, or one that runs like Federal Express? And third, the health insurance industry is really a jobs program, and do we really want to put all those people out of work?

    These are shallow arguments. Car insurance? There’s no law that says you have to own a car, but everyone needs health care. A health insurance mandate is more like forcing every American to buy a new car and giving them a choice between Ford or GM. Post Office and FedEx? A company that can’t send a package overnight from suburban Tarrytown into New York City without round-trip flights to Memphis and back is no model for health care delivery, and besides, I’d like to see what FedEx can do for the price of first class postage. Jobs? A dynamic economy finds ways of redeploying redundant workers in more significant jobs. Wouldn’t those actuaries make good math teachers?

    The arguments were so hollow that no one bothered to argue, and the insurance rep was undoubtedly relieved. A fellow panelist who practices medicine in Cambridge, Dr. David Himmelstein of Harvard, said simply, “My practice would have no trouble making money on Medicare, single-payer reimbursement rates if we didn’t have to pay so many people to argue with insurance companies.”

    Unfortunately, the larger discussion is still stuck on insurance, and as long as it is, the two health care Americas will never become one.

    Georganne Chapin is President and CEO of Hudson Health Plan, a not-for-profit Medicaid managed care organization, and the Hudson Center for Health Equity & Quality, an independent not-for-profit that promotes universal access and quality in health care through streamlining. Both organizations are based in Tarrytown, New York.

  • Is Obama Separating from His Scandinavian Muse?

    Barack Obama may be our first African-American president, but he’s first got to stop finding his muse in Scandinavia. With his speech for the Nobel, perhaps he’s showing some sign of losing his northern obsession.

    On the campaign trail, Obama showed a poet’s sensitivity about both America’s exceptionalism and our desire to improve our country. His mantra about having “a father from Kenya and a mother from Kansas” resonated deeply with tens of millions of Americans.

    Obama’s more recent recasting as a politically correct Nordic seemed out of sync. His speech in Oslo – a surprising defense of American values and role in the world – must have shocked an audience that all but the most passionate courtiers suspect he does not deserve.

    But the bigger challenge will come when he rushes off to Copenhagen to push for his politically dubious climate change agenda. This will take a more serious break from his unfortunate tendency to identify first with the global cognitive elite.

    This is a particularly European, and particularly Scandinavian, affliction. In these countries professors, high-level bureaucrats, and corporate chieftains usually dominate the media, policy making and public perceptions. This constitutes an essential part of what is often called the “Scandinavian consensus” model.

    It works pretty well there. Historically homogeneous, affluent and well-educated Scandinavians generally accept working hard and giving up much for people for the poorer members of societies. These admirable attitudes reflect noble Nordic virtues of thrift, study and social trust.

    These values also work reasonably well in Nordic parts of America, such as in North Dakota. When a local economist told Milton Friedman “In Scandinavia we have no poverty”, he replied: “That’s interesting because in America among Scandinavians, we have no poverty, either.”

    As Obama may finally be learning, America is not Scandinavia, outside a handful of places. It is a big, amazingly diverse country with an expanding population. In a country made up of so many crunched together cultures an expansive welfare state faces many problems. (This is one reason northern Europe is having such a difficult time with its immigrants.)

    In a diverse society, you cannot assume that everyone will play by the rules. Coexisting with very different kinds of people, Americans tend to be less than enthusiastic about paying high taxes to support them.

    Demographics are also a major factor. Our relatively youthful and socially diverse population includes a large component of people, particularly males, with limited skills and education. Yet, at least until they were blindsided by falling poll numbers and stubbornly high unemployment, Obama’s administration treated the recession as if it could be cured Euro-style by simply adding more employment in government, education and medical care.

    Similarly the president’s to date dogmatic embrace of an extreme climate change agenda seems one more saleable to Danes or Swedes than people in the Dakotas or South Carolina. After all, they are well-positioned to absorb the costs. Norway and Sweden enjoy huge reserves of hydropower, the largest sources of renewable fuels. Norway also has lots of oil to boot and fellow traveler Netherlands still boasts strong reserves of natural gas.

    The dense land use policies associated with the climate change agenda fit better into small compact cities like Amsterdam, Copenhagen, Stockholm and Oslo than their sprawling American counterparts. In America, the vast majority lives in sprawling suburbs and small towns. With the exception of the Northwest few parts of the U.S. rely on hydropower, with most of the country reliant on coal, oil and natural gas.

    Then there are political risks to Obama’s dogged embrace of the alarmist “climate change” agenda. Recent Gallup, Pew, and Rasmussen surveys show weakening interest in global warming and increasing levels of skepticism. Today we even have considerable disputes over whether the temperature is even warming. Certainly a series of cold winters and mild summers might make some casual citizens a bit skeptical.

    Even one of the scientists whose email was hacked recently at the UK’s University of East Anglia Climate Research Unit wondered, “Where the heck is global warming?” The revelations, now widely known as Climategate, make clear that some of the science – and the scientists – behind the most apocalyptic predictions are suspect, a view now held by a majority of Americans, according to a recent Rasmussen survey.

    Yet so far, Obama appears blissfully unaffected by the swirling controversy. But the man has a full capacity to surprise. Perhaps he will understand that just because the media and his climate advisors have circled the wagons, this may be a case where the “crowds” may be onto something that the self-proclaimed experts would rather ignore.

    Perhaps if President Obama had studied history, rather than law, he might realize that “smart” (i.e. highly credentialed) types often get things terribly wrong. After all, a century ago eugenics – that some races were intrinsically superior to others – stood as the reigning ideology of the scientific community. Back in the 1970s, the scientific consensus embraced by his science advisor, John Holdren, predicted imminent mass starvation, a catastrophic decline in resource availability, and a bleak future for all developing countries, including China and India. This assessment proved widely off the mark.

    Of course, having committed himself to today’s climate orthodoxy, Obama may find it difficult to reverse course. Not only does he seem ill-disposed to challenging the cognitive elites but he also gains support from the well-funded warming lobby – rent-seeking utilities, “green” venture capitalists, investment bankers and urban land speculators – who hope to wrest huge fortunes from a strict carbon regime.

    If he wants to regain his effectiveness, however, the president needs to realize that these groups and the science establishment are just a small fraction of the country that elected him. His speech in Oslo may be the first sign he may be waking up from his Scandinavian slumber to become the assertive, independent American leader that we need.

    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 next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.

  • DUBAI: A High Stakes Bet on the Future

    I picked up a copy of The Wall Street Journal-Europe on the concourse while boarding my Emirates Air flight from Paris to Dubai. The lead story provided an unexpected relevance to the trip – my first to Dubai. Dubai World, owned by the Dubai government, had announced a 6-month moratorium on payments of some of its $60 billion in debt. Since the announcement, stock markets have been dropping and recovering, company officials have attempted to calm borrowers and government officials have provided considerably less assurance than Dubai’s investors would have preferred.

    Here’s a brief guide to Dubai and some thoughts about its future.

    The United Arab Emirates: Dubai is one of the seven emirates of the United Arab Emirates (UAE), which like the United States and Canada is a federation. Broadly speaking, the emirates represent states or provinces. By far the richest is Abu Dhabi, with something like 10% of the world’s oil reserves. Just 100 miles up the eight-lane freeway is Dubai, with little in oil reserves, but which has used its previous income and massive borrowings to create one of the most spectacular urban environments in the world.

    An Architectural Feast: Dubai is a feast of modern high-rise architecture on shore, off shore and in man-made islands shaped like palms and a map of the world. A tour of the world’s most spectacular modern high-rise architecture could take many trips to China, including Shanghai’s Pudong, the developing western downtown of Beijing, the transforming core of Nanjing, around north station in Shenyang and the world’s largest boom-town, Shenzhen. But Dubai provides nearly as impressive a list of attractions within a comparatively few square miles.

    The Burj: Soon, the new world’s tallest building will open in Dubai. The Burj is virtually complete, with 160 floors and rising nearly 2,700 feet or more than 800 meters. The Burj is more than twice the height of the Empire State Building and a full 60% higher than the previous world record holder, Taipei 101. Adjacent to the Burj is Dubai Mall, which when completed will be the largest in the world. Another Mall, Emirates Mall, has an indoor ski area, a rather unique feature for the desert.

    The Main Street Freeway: The main thoroughfare in Dubai is Sheikh Zayad Road, a 12-14 lane freeway, with additional service lanes on both sides. On either side, there is a row of some of the world’s tallest buildings, often not more than a few feet apart. Except in the Burj area, the tall buildings tend to be in single rows, with low rise development beginning virtually at the rear lot lines.

    Dubai’s Upper North and South Sides: Manhattan has its upper east and west sides, while Dubai has its upper north and south sides. It is an open question which is more impressive, but if all of the planned construction is completed, Dubai’s skyline will overshadow that of New York. On the north side of Sheikh Zayed Road, there is the Dubai Marina, which played prominently in press reports expressing concern about the debt moratorium. Much of the Dubai Marina is still under construction. On the north side of Sheikh Zayed Road there is another development that appears to be at least as large as Dubai Marina, Jumeirah Towers, with many buildings still under construction. These two developments line the freeway for two miles and stretch at least 0.5 miles in each direction from the freeway. There are twin towers that appear to be generally modeled on New York’s classic Chrysler Building just to the east of the Marina on Sheikh Zayed Road. However, uncharacteristically for Dubai, they are not as tall.

    The Palms and the World: Some of the most spectacular architecture is just to the west of the Marina, in and around the Palm Jumeirah Island (actually four islands). The Palm Jumeirah is home to the Atlantis Hotel, which would be the talk of any town in the world, except Dubai, that is. The Jumerirah Palm island includes single family housing on its “fronds” and high rise condominiums at the entrance. A monorail operates, largely empty, to the Atlantis Hotel from the mainland, though does not connect to the Dubai Metro.

    The developer of the Palms and a group of islands called “The World” (in a shape somewhat like the world) is Nakheel, a subsidiary of Dubai World. This subsidiary was the unit that first indicated it would not be able to meet its financial obligations on time

    Burj Al Arab Hotel: Just to the east of Jumeirah Palm is one of Dubai’s oldest and best known architectural masterpieces, the Burj Al Arab Hotel, which sits offshore, though not at the distance many of the publicity photos suggest. This is a prehistoric structure by Dubai standards, having opened in 1999.

    Ring Roads and the Silicon Oasis: Dubai has two incomplete ring roads. The inner ring (Route 311 or “Emirates Road”), 12 lanes, runs through partially developed desert. The outer ring (Route 611), which is up to 10 lanes, runs through even less developed desert. There are, nonetheless, interesting projects along both roads. Dubai’s Silicon Oasis contains massive commercial buildings, still under construction, high rise condominium buildings and single family housing, which is behind security. This impressive development would be illegal in virtually all Australian urban areas, all of the UK and some US urban areas, because it would lie outside the urban growth boundaries that have been imposed by planners in those places.

    Academic City: On the edge of Silicon Oasis lies the Academic City, which contains branches of universities such as Murdoch (Perth, Australia) and Michigan State. Perhaps someday there will be an annual gridiron or soccer match played between the two in the nearby new Cricket Stadium nearby the Academic City.

    The Urban Area: The Emriate of Sharjah is to the immediate east of Dubai and continues the urbanization for many miles. The urban area (containing both Dubai and Sharjah) has approximately 2 million people. This is a very small population (less than that of Sacramento or Portland) for an urban area of such world significance and monumental architecture.

    The Dominant Ethnic Minority: The native or citizen population of “Emiratis” is much smaller, estimated at under 20%. The balance of the population is primarily expatriate workers who are in Dubai on temporary visas. So long as the hundreds of thousands of Indians, Pakistanis and others have employment, they can stay.

    Future Plans: Dubai has every intention of continuing its building binge. Already, a huge new international airport is under construction, which will have an annual capacity as much as 50% greater than the world’s largest airport (Atlanta). Unbelievably, the present airport, which has had significant recent expansion, would remain open. The two airports together would provide Dubai with more passenger capacity than the five airports of Los Angeles (with its 18 million consolidated metropolitan area population). There are many more hotels, large condominium and residential projects on the drawing boards. There are plans for a luxury hotel under water.

    Projects on Hold: However, Dubai may not be the master of its own fate. The UAE and the Emirate of Abu Dhabi, both with much more in financial resources, are expected to provide Dubai some relief. However, any assistance will come at a price. Control of crown jewel “Emirates Airlines” could be lost. The new international airport could be put off, particularly with nearby Abu Dhabi also expanding its airport

    The question is whether Dubai can rebound. There are plenty of uncompleted projects like the “City of Arabia” development along the Emirates Ring Road, far from the core. The project’s website says it will be completed in 2008. It is nearly 2010, and to put it mildly, from Emirates Road, the project appears to be a bit behind schedule.

    The undersea hotel project also appears to be on hold. The proposed Nakheel Tower could rise to over 4,000 feet and would be located just to the east of Jumeirah Towers. It was, however, put on hold in early 2009. Nakheel, of course, is at the heart of the Dubai financial crisis. Construction has apparently stopped on Nakheel’s Deira Palm (the largest of the palms) and the World.

    Of course, Dubai is not the only place where financial difficulties have put buildings on hold. Chicago’s “Spire” is little more than a circular hole next to Lake Shore Drive, rather than a rapidly rising edifice that would have been the world’s second tallest tower, after Dubai’s Burj.

    Whither Dubai? It seems fair to ask what Dubai was seeking to accomplish. On one hand, there was an interest in developing a strong tourism base, and tourism has increased over the past decade. Yet, Dubai attracts only 1/10th of tourism of Las Vegas, while having more than one-half the hotel rooms. One challenge is that what has been built may already be too large to be supported by the permanent population, Emirati or expatriate.

    But the real question is where Dubai goes from here. Late reports indicate that Dubai World intends to restructure nearly one-half of its debt. Creditors had hoped that the richer Emirate of Abu Dhabi would bail out Dubai, not much different from Texas bailing out a virtually bankrupt California. The more likely possibility could be that the UAE federal government itself might guarantee some debts but neither seem in any hurry to provide blanket relief. This could be reflective of the growing revulsion to the massive government bailouts from the Great Recession.

    At this point, the international repercussions appear unlikely to be large enough to start phase II of the Great Recession. Yet the notion of providing a safe “haven” in a tough neighborhood could still pay off in the long run as it has for cities like Singapore. It may not be conventional wisdom to say this, but the Emiratis could end up with the last laugh.

    Top photograph: Dubai Silicon Oasis
    Second Photograph: The Burj (November 27, 2009)

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

  • Capping Emissions, Trading On The Future

    Whatever the results of the Copenhagen conference on climate change, one thing is for sure: Draconian reductions on carbon emissions will be tacitly accepted by the most developed economies and sloughed off by many developing ones. In essence, emerging economies get to cut their “carbon” intensity–a natural product of their economic evolution–while we get to cut our throats.

    The logic behind this prediction goes something like this. Since the West created the industrial revolution and the greenhouse gases that supposedly caused this “crisis,” it’s our obligation to take much of the burden for cleaning them up.

    Plagued by self-doubt and even self-loathing, many in the West will no doubt consider this an appropriate mea culpa. Our leaders will dutifully accept cuts in our carbon emissions–up to 80% by 2050–while developing countries increase theirs, albeit at a lower rate. Oh, we also pledge to send billions in aid to help them achieve this goal.

    The media shills, scientists, bureaucrats and corporate rent-seekers gathered at Copenhagen won’t give much thought to what this means to the industrialized world’s middle and working class. For many of them the new carbon regime means a gradual decline in living standards. Huge increases in energy costs, taxes and a spate of regulatory mandates will restrict their access to everything from single-family housing and personal mobility to employment in carbon-intensive industries like construction, manufacturing, warehousing and agriculture.

    You can get a glimpse of this future in high-unemployment California. Here a burgeoning regulatory regime tied to global warming threatens to turn the state into a total “no go” economic development zone. Not only do companies have to deal with high taxes, cascading energy prices and regulations, they now face audits of their impact on global warming. Far easier to move your project to Texas–or if necessary, China.

    The notion that the hoi polloi must be sacrificed to save the earth is not a new one. Paul Ehrlich, who was the mentor of President Obama’s science advisor, John Holdren, laid out the defining logic in his 1968 best-seller, The Population Bomb. In this influential work, Ehrlich predicted mass starvation by the 1970s and “an age of scarcity” in key metals by the mid-1980s. Similar views were echoed by a 1972 “Limits to Growth” report issued by the Club of Rome, a global confab that enjoyed a cache similar to that of the United Nations’ Intergovernmental Panel on Climate Change.

    To deal with this looming crisis, Holdren in the 1977 book Ecoscience (co-authored with Anne and Paul Ehrlich) developed the notion of “de-development.” According to Holdren, poorer countries like India and China could not be expected to work their way out of poverty since they were “foredoomed by enormous if not insurmountable economic and environmental obstacles.” The only way to close “the prosperity gap” was to lower the living standards of what he labeled “over-developed” nations.

    These predictions were less than accurate. World-wide systemic mass starvation did not take place as population escalated. Rather those many millions wallowing in poverty in the developing world, particularly in Asia, lifted themselves into the global middle class. Far more efficient ways to use energy have been developed, and unexpected caches of new resources continue to be discovered all over the planet.

    Yet however wrong-headed, Holdren’s world view now has jumped from the dustbin of history into the craniums of presidents and prime ministers. President Obama’s pledge to “restore science to its rightful place” has morphed into state-sponsored scientific ideology.

    The blind acceptance of this agenda threatens the credibility of Obama and other Western leaders. For one, if the crisis is by its nature global why should we allow massive increases in carbon emissions in developing countries–China will soon surpass us in greenhouse gas emissions, if it hasn’t already–while we draconically cut ours? Does the planet really care if it’s turned to toast by American- vs. Chinese-made gas?

    Then there’s the specious historical narrative that insists we pay for creating the industrial revolution since it brought on global warming. Should the West pay for the sins of the British who brought electricity and railroads to India? Does America owe carbon penance for making the technology transfers critical to East Asia’s remarkable rise? Maybe we should start by making Wal-Mart cancel its China orders. That might help de-carbonize the planet a bit.

    There’s also growing skepticism about the whole warmist narrative. Climate change now ranks last among 20 top issues in a recent Pew report. There’s been a similar rise in skepticism in the U.K., once a hot bed of warmist sentiment.

    The reasons for the shift may vary. First, there’s a controversy over the temperatures of the past decade, with even some concerned about climate change admitting that there has not been the expected warming. Or perhaps a deep recession has made many “rich” countries feel a trifle less “overdeveloped.”

    And now we have Climate-gate–where leading warmist pedagogues are trying to suppress unsuitably conformist scientists and perhaps even cook the numbers a bit. Although you won’t see too much tough coverage in the mainstream press, the tawdry details have poured out over the Internet and diminished the aura of scientific objectivity of some leading global warming researchers. One recent poll shows that a large majority of Americans believe scientists may have indeed falsified their research data. By well over 4 to 1, they also believe stimulating the economy is a bigger priority than stopping global warming.

    Clearly the political risks of giving first priority to the carbon agenda are on the rise. Australia’s Senate just voted down that country’s proposed cap and trade scheme. The Western center-right, once intimidated by the well-financed greens and their media claque, has become bolder in challenging climate change alarmism.

    There’s also something of a rebellion brewing, at least toward emissions trading schemes, among some liberals from the South and Midwest, notably Wisconsin’s Russ Feingold and North Dakota’s Byron Dorgan. As analyst Aaron Renn has pointed out, these areas are most likely to be negatively affected by the current climate change legislation. Feingold recently stated that he was “not signing onto any bill that rips off Wisconsin.”

    So why do leaders like Barack Obama and British Prime Minister Gordon Brown continue identifying themselves with the climate change agenda and policies like cap and trade? Perhaps it’s best to see this as a clash of classes. Today’s environmental movement reflects the values of a large portion of the post-industrial upper class. The big money behind the warming industry includes many powerful corporate interests that would benefit from a super-regulated environment that would all but eliminate potential upstarts.

    These people generally also do not fear the loss of millions of factory, truck, construction and agriculture-related jobs slated to be “de-developed.” These tasks can shift to China, India or Vietnam–where the net emissions would no doubt be higher–at little immediate cost to tenured professors, nonprofit executives or investment bankers. The endowments and the investment funds can just as happily mint their profits in Chongqing as in Chicago.

    Global warming-driven land-use legislation possesses a similarly pro-gentry slant. Suburban single family homes need to be sacrificed in the name of climate change, but this will not threaten the large Park Avenue apartments and private retreats of media superstars, financial tycoons and the scions of former carbon-spewing fortunes. After all, you can always pay for your pleasure with “carbon offsets.”

    So who benefits from this collective ritual seppuku? Hegemony-seeking communist capitalists in China might fancy seeing America and the West decline to the point that they can no longer compete or fund their militaries. A weakened European Union or U.S. also won’t be able provide a model of a more democratic version of capitalism to counter China’s ultra-authoritarian version.

    The Chinese may win a victory in Copenhagen greater than anything accomplished so far in the marketplace–and our leaders will likely thank them for it. Forget bowing to the emperor in Tokyo; like vassal states at the height of the old Middle Kingdom, the new requisite diplomatic skill for Westerners will be kow-towing to Beijing.

    Yet most people in the developing world will not benefit from the suicide of the West. The warmists’ vision is not one of growing prosperity, but of capping wealth at a comparatively low level. De-industrialization means the West falls back while emerging economies grow a bit. The “prosperity gap” may close, but ultimately everyone is left with less prosperity.

    In the long run developing countries gain less from harvesting guilt than enjoying a bounty of customers, capital and expertise. The West’s experience and technology can assist developing nations in improving their far more greatly threatened environment. Turning the West into a spent force will leave the world poorer, dirtier and ultimately less hopeful.

    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 next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.

  • Fighting Spirit Lives On In Northern Montana

    On a hot July day in 1923 northern Montana served as the unlikely backdrop for a boxing extravaganza on the international stage. There on the plains right outside the City of Shelby, Jack Dempsey defended his World Heavyweight Boxing Championship against the hard-hitting Tommy Gibbons – the only world championship fight that Jack Dempsey ever fought that went the full fifteen rounds.

    The fight began as a real-estate stunt and a chance to get the recently oil-rich town’s name into the national media. As recounted in a 2004 Chicago Tribune story “The prestige and attention brought by a world-class sporting event could bring more money — perhaps even new residents and investment — into the community, or so thought town leaders at the time. Boomtown mentality had taken over.”

    Local boosters lauded the bustling town near the Canadian border as the Tulsa of the West and built a 40,208-seat stadium to host the match – the biggest outdoor arena in America at the time.

    But there on Champions Field the “gladiatorial battle” between Dempsey and Gibbons was fought amidst ticketing problems reminiscent of the modern day Woodstock Festival.

    Reports throughout the last days leading up to the fight cast doubt on the event. And even though Jack Dempsey stepped in to assure organizers that a bout would take place, the damage had been done. Rail services had been cancelled for special trains, advance reservations cancelled and fight fans stayed home. In the end, only 7,702 paying fans showed up. An estimated 13,000 people got to see the fight free.

    Today a local group of dedicated citizens are working hard to build a park on the original fight sight with a full size ring holding life size bronzes of Jack Dempsey, Tommy Gibbons and the referee. Kiosks throughout the park will depict pictures and audio highlights recounting fight events as well as feature the history of northern Montana homesteading, the oil and gas industry and the railroad.

    The fighting spirit lives on in other ways in Northern Montana as four-term Mayor Larry Bonderud (Shelby, Montana) and other civic leaders step into the ring of economic development on a daily basis.

    Shelby, the County seat of Toole County, is a small community that thinks and acts big. Led by Mayor Bonderud and supported by a strong cast of local and regional civic and business leaders, the city has set in play a diverse, aggressive and successful approach to economic development focusing on attracting young families by bringing new businesses, industries and family wage jobs to the community. This approach is paying off, with the city realizing a 6.31 percent population increase since 2000.

    Capitalizing on long-term vision and an entrepreneurial approach to economic development, Shelby has been successful in attracting and growing business and employment opportunities within the city and county. Going back ten years, in an effort to grow job opportunities in the region, the city worked to attract a private adult correctional center near the city. Fast forward to today, the Crossroads Correctional Facility is the top private employer within the county with over 150 employees.

    Always the promoter, Bonderud suggests that “We’re one of the safest counties anywhere,” noting some 230 correction officers, Border Patrol agents, local police and regional FBI and Montana Highway Patrol officers who work in the county with 5,100 residents.

    The community continues to work on growing its industrial base by expanding its industrial park, capitalizing on its growing wind energy developments and a concerted development effort to put together an innovative 25 million dollar intermodal facility and energy park that capitalizes on existing rail capacity, access to energy and a location adjacent to the Canadian border. The city, county and regional port authority are working and investing together to make this opportunity a reality.

    Working together seems to come naturally in these parts. Shelby and Toole County are part of the 5-county Sweetgrass Development region (Cascade, Glacier, Pondera, Teton and Toole counties) that is working collaboratively to diversify and grow the regional economy and capitalize on its competitive advantages. Nestled together adjacent to the I-15 corridor and along the Rocky Mountain front, the five county region is well positioned to meet growing needs for domestic energy consumption in the western United States. The region’s renewable energy sources including wind and hydro-electric based power, and its significant agricultural capacity (the backbone of the regional economy) have served as a buffer in the recent economic downturn.

    The Sweetgrass Development organization is spearheaded by Cascade County Commissioner Joe Briggs, an affable and effective leader who along with regional partners Corlene Martin, Cynthia Johnson, Cheryl Currie, Bill McCauley, Brett Doney and Mayor Bonderud are working to set aside parochial power plays and find economic development solutions that work for the region. A common refrain is “what is good for one is good for all”. This team spirit is exemplified by regional efforts to retain and expand value-added agriculture opportunities including milling operations and packing plants and assistance in growing the regional capacity for wind energy development and transmission.

    The region is not driven by wind and wheat alone. The area’s numerous high-tech, knowledge-based industries such as D.A. Davidson (financial consultants), Centene (healthcare services), AvMax (aviation support and management services), Intercontinental Truck Body (truck body manufacturing) exemplify the knowledge base and work ethic inherent in the region and speak of the natural appeal of the Sweetgrass region as one component in the race to attract and retain a quality work force.

    A combination of “can do” spirit and strategic investments to support growing local companies and new infrastructure to feed new industries fitting with the region’s strengths place the Shelby, MT region in a strong position to beat the recession.

    Doug McDonald is a Senior Associate with , a development firm specializing in economic development strategies and initiatives for small to medium-sized metropolitan areas and urbanizing rural regions. Delore Zimmerman is president and CEO of Praxis Strategy Group and publisher of Newgeography.com

    Photo by jimmywayne

  • Growing Today’s Green Jobs Requires Solid Economic Development Policy

    I was hired for my first Green Job, thirty-four years ago, shoveling horse stalls for a barn full of Tennessee Walking Horses. The droppings and bedding that was removed from the stables was then composted and applied to my employer’s crops in lieu of chemical fertilizers. You don’t get much greener than that!

    Now don’t get me wrong, I am not bragging about holding such a lucrative job because the 75 cents an hour they paid me made this Ozark, Missouri boy feel rich. Actually, I am bragging that I learned the value of environmental stewardship and the interdependence of our economy at an early age. For our community, no horses meant no corn.

    My employer, a local auto dealer who owned the farm, created these value-added “green jobs” without any subsidy from the government or without a governmental policy forcing his customers to pay him a subsidy. But I guess that is the good old days. So much for market forces and producing a product that customers will pay for.

    I have spent more than 25 years in the profession of economic development serving at the community and state levels. I have worked with hundreds of companies to create tens of thousands of jobs. In that time, I have seen more “silver bullets” than the Lone Ranger ever gave away. These have included the following “you must have” edicts: four lanes/interstate highway; a new airport terminal; micro chips; nanotechnology; aqua culture; speculative buildings; a Super Bowl; a bohemian bastion; or a biotech cluster. Now, it’s environmentally friendly “green” businesses like wind farms and solar fields that are calling for precious public resources.

    Yet in reality, these silver bullets usually work only for a few places and certainly do not constitute a national strategy for job creation. Some places may benefit from the rush to wind and solar energy, although the benefits may well diminish if the panels or turbines are made elsewhere. There are not too many industries that have such a large profit margin that they can afford to pay double or triple their existing electric rates.

    In fact, the answer to job creation is definitely not financially supported and government-mandated green energy policy that focuses its efforts on wind and sun. The reasons why that policy won’t work include:

    1. A quick review of a recent issue of a national economic development trade publication featured ads by 32 states that claim to be the next green energy place, although they only focus on wind and solar. Maybe it is because the public is being coerced into subsidizing these industries. But at the end of the day there will NOT be 32 places nationwide that are green energy centers of excellence, but more likely a dozen or so globally.
    2. Most of these green initiatives rely on nature. Nature is not constant – that is what makes it “natural.” Wind may be a suitable form of power off the ocean on Monday, Tuesday and Wednesday evenings but what happens when it quits blowing? Not only are the resources stranded and not providing a return on investment but no power is being generated.
      Now don’t get me wrong, wind power has worked for years. Farmers have been using it to fill up water tanks for their animals for hundreds of years. But as all farmers know, if the wind quits for long enough, the animals die. Are we to bet our economies and our lives on the hope that maybe someone can develop a storage tank for electricity generated by the wind even if it quits?

    3. Solar power is great. But let’s be realistic. How are we ever going to get solar panels on the roof of every home – at a cost of $60,000 or more – in America when some people don’t even have cable television or broadband access yet? And what about the heat radiated from the panels themselves? And, solar power still has the same storage and reliability issues that come with wind power.

    Let’s be clear that here are two very clear outcomes we, as a nation, must strive to achieve: low cost, environmentally sensitive energy independence and job creation. These are not mutually exclusive goals.

    Energy independence will never come from wind and solar power; neither is dependable or manageable enough to meet our needs. Compound this with artificially mandated requirements and the hidden taxes that go with them and we are facing higher energy prices which will cripple the economy.

    When it comes to jobs, we must embrace the age-old adage: Be yourself but be great. We call this model Community Capitalism. In short, Community Capitalism is focused and organized philanthropy and business investment occurring simultaneously in five strategic areas based upon historical and geographical advantages in order to create jobs and wealth.

    I am blessed to live in a place, Kalamazoo, Michigan, that has embraced the fundamentals of Community Capitalism for more than 100 years. Kalamazoo is the place where the friable pill, a pill easily dissolved when ingested, was invented; where Dr. Homer Stryker invented the oscillating device that cuts casts off; where the yellow-checkered cab was invented; where most of the nation’s corsets and paper were once produced, and home of the Kalamazoo sled, the direct-to-you-from Kalamazoo Stove, Shakespeare Rod & Reel and Gibson Guitars.

    So what are we great at? We are one of only a few places globally where a drug can move from concept through trials to market. We are centrally located, a short drive to the logistical hub of Chicago. We can staff a call center or customer care center with the speed of light. We will leave the micro chips to Boise, the film industry to Hollywood, the Country music business to Nashville, the financial district to Manhattan; and telecommunications to Dallas. Not to say we won’t welcome a few of their companies. But they are great at those things; we will be good at best.

    So how do we create jobs using the five precepts of Community Capitalism: place, capital, infrastructure, talent and education? The same way communities have grown for hundreds of years.

    First is the concept of place. Great economic regions know who they are and that sense of identity ensures people are not only comfortable within the environment but can nurture their personal and professional growth. Think about places that do this really well and where place has become their brand – like Boise, Idaho; Austin, Texas; Melbourne, Australia and Gorongosa in Africa.

    Capital is critical to spur innovation and entrepreneurship. In the case of Kalamazoo, we established in 2005 a limited partnership venture fund to invest in early-stage life science companies. The $100 million Southwest Michigan First Life Science Fund is believed to be the largest sum of community-based private capital ever to be raised and managed by an economic development organization. Other communities have focused on angel networks, revolving loan funds or even micro lending. But whatever the source, we know that companies cannot grow without the capital to grow a business.

    Great communities understand that great minds need the right place to make things happen and are committed to providing the necessary infrastructure. For example, when we saw the need to create a place for local talent to incubate biotech concepts, we created a 69,000-square-foot accelerator to do just that. This same catalyst served the Palm Beach, Florida region’s desire to grow life science research when Scripps Research Institute decided to locate there and mix its DNA with the local biotech economy. It also worked for Corpus Christi, Texas when the Harte Research Institute was built to chart the future of the Gulf of Mexico.

    Communities cannot be great if they lack a long-term, funded commitment to education and academic excellence. Our legacy in life science and manufacturing prominence has resulted in an indigenous cluster of highly educated people. And we realize that educated people seek out strong education for their families which in turn produces a high-performance workforce.

    We are home to the world-renowned Kalamazoo Promise college scholarship program which provides free scholarships to every child that graduates from the Kalamazoo Public school system. In fact, Southwest Michigan’s diversified workforce is highly educated and boasts one of the nation’s highest concentrations of Ph.D.’s (1.84%), more than two times the national average per capita (0.81 %).

    Other economic regions have used “education” to make a difference. For example, the African Children’s Choir uses its funds to build schools, provide medical care and fund community development projects in the villages from which its young members come from. Oprah Winfrey’s Leadership Academy for Girls in South Africa looks to instill change for young girls in a place where almost a third of all pregnant women are afflicted with HIV.

    Finally, we recognize that a community needs to embrace talent. Kalamazoo is home to the Stryker Corporation, which is the only publicly traded company to achieve double-digit growth every year over a twenty-year period due to its commitment to putting the right people in the right place at the right time.

    I understand that none of these five things is as easy as the Lone Ranger’s silver bullet. It is much harder to raise capital to grow companies than it is to get your congressman to earmark dollars for highways or build a speculative building in a corn field. But if we are to truly build a sustainable economy that grows jobs and wealth, we must invest in Community Capitalism while limiting artificial governmental manipulations of the economy.

    Ron Kitchens serves as the Chief Executive Officer of Southwest Michigan First, as well as the General Partner of the Southwest Michigan First Life Science Fund. Ron has worked with more than 200 Fortune 500 corporations as a Certified Economic Developer in addition to starting multiple privately held companies and serving as a city administrator, elected official and staff member to United States Senator John Danforth.

  • The World’s Smartest Cities

    In today’s parlance a “smart” city often refers to a place with a “green” sustainable agenda. Yet this narrow definition of intelligence ignores many other factors–notably upward mobility and economic progress–that have characterized successful cities in the past.

    The green-only litmus test dictates cities should emulate either places with less-than-dynamic economies, like Portland, Ore., or Honolulu, or one of the rather homogeneous and staid Scandinavian capitals. In contrast, I have determined my “smartest” cities not only by looking at infrastructure and livability, but also economic fundamentals.

    These criteria unfortunately exclude mega-cities like New York, Mexico City, Tokyo or Sao Paulo, which suffer from congenital congestion, out-of-control real estate prices and expanding income disparities–symptoms of what urban historian Lewis Mumford described as “megalopolitan elephantiasis.”

    Instead, today’s “smart” cities tend to be smaller, compact and more efficient: places like Amsterdam; Seattle; Singapore; Curitiba, Brazil; and Monterrey, Mexico. This is not an entirely new notion: Between the 14th and 18th centuries, modest-sized cities like Venice, Italy; Antwerp, Belgium; and Amsterdam nurtured modern capitalism and created canals and vibrant urban quarters that remain wonders even today.

    In the Pacific-centric modern era, smart commercial cities are increasingly found outside Europe. Indeed, the most likely 21st-century successor to 15th-century Venice is Singapore, a commercially minded island nation that, like its forebear, is run by an often enlightened authoritarian regime.

    When it first achieved independence in 1965, Singapore’s condition was comparable to other developing cities like Bombay, Cairo, Lagos or Calcutta. The island city’s neighbors included unstable countries like Vietnam, Malaysia and Thailand. Its GDP per capita ranked well below those of Argentina, Trinidad, Greece or Mexico.

    The country’s first prime minister and current eminence grise, Lee Kuan Yew, was determined to change reality. Today, Singapore, with a population of less than 5 million, boasts an income level close to the wealthiest Western countries and a per-capita GDP ahead of most of Europe and all of Latin America. Once largely semi-literate, its population is now among the best-educated in Asia.

    To be sure, this enviable achievement was accomplished in an authoritarian fashion, but much of what Singapore has done must be considered “smart” by any reasonable accounting. Strategic investments taking advantage of its location between the Indian and Pacific Oceans have paid off handsomely: Today Singapore Airport is Asia’s fifth largest, and the city’s port ranks as the largest container entrepôt and is the second biggest, after Shanghai, in terms of cargo volume in the world.

    All this has made Singapore a huge lure for foreign companies, with over 6000 multinationals, including 3600 regional headquarters, now located there. For foreign managers, engineers and scientists, largely English-speaking Singapore offers a pleasant and predictable environment, particularly compared with other Asian centers.

    At least one recent survey by the World Bank’s International Finance Corporation rates Singapore No. 1 in the world for ease of doing business. Although its growth has been slowed by the recession, the city’s close ties to the resurging economies of Southeast Asia, China and India lead many forecasters to predict a strong recovery over the next year.

    Hong Kong, yet another outpost of British imperialism, has also performed well. Last year the World Bank ranked the area No. 3 for ease of doing business, compared with No. 89 for the rest of China. As long as Chinese Communists allow wider freedoms in Hong Kong than in the mainland, the area should continue to take advantage of its basic assets, including the world’s third-largest container port, an excellent airport and a highly skilled entrepreneurial population.

    The continuing appeal of Hong Kong was vindicated by the recent decision of Hong Kong Shanghai Bank Chief executive George Geoghegan to relocate there from London. As the center of the world economy continues to shift to Asia while Europe and America struggle, he is likely to find more company.

    Not all the world’s “smart” cities are trading giants like Hong Kong and Singapore. They also include well-run metropolises, such as the city of Curitiba. The south Brazilian city is regarded as an innovator in everything from bus-based rapid transit, used by some 70% of residents, and its balanced, diverse economic development strategy.

    With a population of 3.5 million, Curitiba demonstrates how to achieve the evolving Brazilian dream without the mass violence, transportation dysfunction and ubiquitous grinding poverty that plague many other Latin American metro areas. The city’s program of building “lighthouses”–essentially electronic libraries–for poorer residents has become a model for developing cities world wide. These are among the reasons Reader’s Digest recently named Curitiba the best place to live in Brazil.

    Another similarly “smart” city in the developing world is Monterrey, Mexico, which has emerged from relative obscurity and turned itself into a major industrial and engineering center over the past few decades. The city of 3.5 million sits adjacent to the dynamic U.S.-Mexico border region and has 57 industrial parks specializing in everything from chemicals and cement to telecommunications and industrial machinery.

    Over the last decade, the area has consistently grown at a faster rate than the rest of Mexico–or, for that matter, the United States. Monterrey and its surrounding state, Nuevo Leon, now boast per-capita GDP roughly twice that of the rest of Mexico.

    Although hard-hit by the current recession, Monterrey seems poised for an eventual recovery. Dominated by powerful industrial families, the area has long been business-friendly. It has also become a major education center, with over 82 institutions of higher learning and 125,000 students, led by the Instituto Technologico de Monterey, considered by some Mexico’s equivalent of MIT or Cal Tech.

    Of course, “smart” cities also exist in the advanced industrial world. Amsterdam, a longstanding financial and trading capital, is home to seven of the world’s top 500 companies, including Philips and ING. Relatively low corporate taxes and income taxes on foreign workers attract individuals and companies, one reason why, in 2008, the Netherlands was largest recipient of American investment in Europe. Amsterdam’s advantages include a well-educated, multilingual population and a lack of political corruption.

    Amsterdam’s relatively small size–740,000 in the city and 1.2 million for the entire metropolitan area–belies its strategic location in the heart of Europe and proximity to the continent’s dominant port, Rotterdam. The city’s Schiphol airport, Europe’s third-busiest, is only 20 minutes from the center of Amsterdam, a mere jaunt compared with commutes to the major London or Paris airports. Schipol has also spawned a series of economically vibrant “edge cities” that appear like more transit-friendly versions of Houston or Orange County, Calif.

    North America also has its share of smart cities. Although self-obsessed greens might see their policies as the key to the area’s success, Seattle’s growth really stems more from economic reality. In this sense, Seattle’s boom has a lot to do with luck–it’s the closest major U.S. port to the Asian Pacific, which has allowed it to foster growing trade with Asia.

    Furthermore, Seattle’s proximity to Washington state’s vast hydropower generation resources–ironically the legacy of the pre-green era–assures access to affordable, stable electricity. The area also serves as a conduit for many of the exportable agricultural and industrial products produced both in the Pacific Northwest and in the vast, resource-rich northern Great Plains, linked to the region by highways and freight rails.

    As North America’s economy shifts from import and consumption toward export and production, Seattle’s rise will be a model for other business-savvy cities in the West and South. Houston’s close tie to the Caribbean, as well as its dominant global energy industry, thriving industrial base, huge Texas Medical Center complex and first-rate airport, all work to its long-term advantage. Arguably the healthiest economically of America’s big cities, Houston is also investing in–not just talking about–its green future; last year it was the nation’s largest municipal purchaser of wind energy.

    Another smart town poised to take advantage of an industrial expansion is Charleston, S.C., which has expanded its port and manufacturing base while preserving its lovely historic core. Once an industrial backwater, Charleston now seems set to emerge as a major aerospace center with a new Boeing 787 assembly plant, which will bring upward of 12,000 well-paying jobs to the region.

    Further inland, Huntsville, Ala., has long had a “smart” core to its economy–a legacy of its critical role in the NASA ballistic missile program. Today the area’s traditional emphasis on aerospace has been joined by bold moves into such fields as biotechnology. Kiplinger recently ranked the area’s economy No. 1 in the nation.

    With the likely rise in commodity prices over the next decade, Canada also seems likely to produce several successful cities. Perhaps the best positioned is Calgary, Alberta. Over the past two decades, the city’s share of corporate headquarters has doubled to 15%, the largest percentage of main offices per capita in Canada.

    Although last year’s plunge in oil prices hit hard, rising demand for commodities in Asia should help revive the Albertan economy by next year.

    In their press releases, all these cities make a point of bragging about being green and environmentally conscious. Yet they have demonstrated their “intelligence” in other ways–by exploiting their locations and resources to make savvy business and development decisions. At the end of the day, it will not be their clean air but their commercial prowess–as has been the case in history–that will sustain their success in the decades ahead.

    List of the World’s Smartest Cities

    1. Singapore The 21st-century successor to 15th-century Venice, this once-impoverished island nation now boasts an income level comparable to the wealthiest Western countries, with a per-capita GDP ahead of most of Europe and Latin America. Singapore Airport is Asia’s fifth-largest, and the city’s port ranks as the largest container entrepot in the world. Over 6,000 multinational corporations, including 3,600 regional headquarters, are located there, and it was recently ranked No. 1 for ease of doing business.
    2. Hong Kong As the center of the world economy continues to shift from West to East, Hong Kong is certainly reaping the benefits. Hong Kong Shanghai Bank’s chief executive recently relocated there from London. Its per-capita GDP is ranked 15th in the world. The Heritage Foundation and The Wall Street Journal have ranked Hong Kong the freest economy in the world.
    3. Curitiba, Brazil This well-run metropolis in southern Brazil is famous for its rapid bus-based transit, used by 70% of its residents, and its balanced, diverse economic development strategy. The city’s program of building “lighthouses”–essentially electronic libraries–for poorer residents has become a model for developing cities worldwide. Environmental site Grist recently ranked Curitiba the third “greenest” city in the world.
    4. Monterrey, Mexico Over the past few decades Monterrey has emerged from relative obscurity into a major industrial and engineering center. The city of 3.5 million has 57 industrial parks, specializing in everything from chemicals and cement to telecommunications and industrial machinery. Monterrey and its surrounding state, Nuevo Leon, boast a per-capita GDP roughly twice that of the rest of Mexico.
    5. Amsterdam This longstanding financial and trading capital is home to seven of the world’s top 500 companies, including Philips and ING. Relatively low corporate taxes and income taxes on foreign workers attract companies and individuals. Amsterdam’s advantages include a well-educated, multilingual population and a lack of political corruption, as well as its location–in the heart of Europe, close to a major international airport and a short train trip to Rotterdam, the continent’s dominant port.
    6. Seattle, Wash. Seattle’s location close to the Pacific Ocean has nurtured trade with Asia, and its proximity to Washington state’s vast hydro-power generation station assures access to affordable, stable clean electricity. The area also serves as the conduit for many of the exportable agricultural and industrial products produced both in the Pacific Northwest and in the vast, resource-rich northern Great Plains, closely linked to the region by highways and freight trains.
    7. Houston, Texas Houston’s close tie to the Caribbean, as well as its dominant global energy industry, thriving industrial base, huge Texas Medical Center complex and first-rate airport all work to its long-term advantage. Arguably the big city in the U.S. with the healthiest economy, Houston is also investing in a “green” future; last year it was the nation’s largest municipal purchaser of wind energy.
    8. Charleston, S.C. Charleston has expanded its port and manufacturing base while preserving its lovely historic core. Once an industrial backwater, Charleston now seems poised to emerge as a major aerospace center, with the location of a new Boeing 787 assembly plant there, which will bring upward of 12,000 well-paying jobs to the region.
    9. Huntsville, Ala. This southern city has long had a “smart” core to its economy, a legacy of its critical role in the NASA ballistic missile program. Today the area’s traditional emphasis on aerospace has been joined by bold moves into such fields as biotechnology. Kiplinger recently ranked the area’s economy No. 1 in the nation.
    10. Calgary, Alberta With the likely rise in commodity prices over the next decade, Canada seems likely to produce several successful cities. Over the past two decades, Calgary’s share of corporate headquarters has doubled to 15%, the largest percentage of main offices per capita in Canada. Although the plunge in oil prices hit hard, rising demand for commodities in Asia should help revive the Albertan economy by next year.

    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 next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.

  • When Granny Comes Marching Home Again… Multi-Generational Housing

    During the first ten days of October 2008, the Dow Jones dropped 2,399.47 points, losing 22.11% of its value and trillions of investor equity. The Federal Government pushed a $700 billion bail-out through Congress to rescue the beleaguered financial institutions. The collapse of the financial system in the fall of 2008 was likened to an earthquake. In reality, what happened was more like a shift of tectonic plates.

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    The driveway tells the story. The traditional two-story 2,200 square foot suburban home has a two-car attached garage. Today’s multi-generational families fill the garage, the driveway and often also occupy the curb in front of the home. The economic crisis that is transforming America is also changing the way we live. The outcome will change the way America views its housing needs for the balance of the 21st Century.

    As is often the case, we can more clearly see the future by looking into our past. That is because time and time again America has reverted to its roots when confronted with a challenge. The root of the American family is the home. A century ago, America was an agrarian nation. Most Americans grew up on the farm or in a small town often tied to agriculture. A century ago, our census was 92,000,000, less than one-third of today’s population. Los Angeles was a city of 319,000. Cleveland was the fifth largest city with 560,000. The tenth largest city in 1910 was Buffalo NY with 423,000 souls.

    A century ago, parents, children, grown children, and grandparents lived together in America’s homes. In 1910, the vast majority of kids did not go off to college. They stayed home and worked the farm. Mom certainly did not drive and usually she did not work outside the home. Grandma – who then as now usually outlived grandpa – did not go off to an active senior housing project or nursing home at age 55. With the average life expectancy at just 49 years, there was little market for such facilities. A young Grandma lived in the family home and helped with the cooking, the sewing and the child rearing.

    Along the way, we fought in two world wars, America industrialized and the great Middle Class exploded. Our children went off to college and did not return. Our cities exploded. By the end of the century, Los Angeles grew to 3,700,000. The tenth largest city was Detroit with 1,000,000. Children were expected to leave the home shortly after high school and never come back, except to visit.

    Big changes occurred on the other end of the demographic curve. As life expectancy grew to 75. Grandma had her choice of active senior living, congregate care or a skilled nursing facility when she hit 70 and slowed down.

    The expectations of greater family dispersion – with young people leaving home early and grandparents on their own – drove much of real estate thinking at the end of the 20th Century. With empty-nesters and young people both heading back to the city, urban planners were focusing on high-rise apartments and condominiums in dense urban areas. Many eagerly anticipated the death of the suburbs since the number of young families declined. Across the country, and even in suburban areas like the City of Irvine, CA brilliant urban planners began rezoning industrial land into high density housing. The face of America was thought to be changing in predictable ways.

    Then, along came 2008 and the economic crisis. The plates under our feet began to shift. The mass migration to dense urban living evaporated as people stayed put and speculating in condos lost all economic logic. The shiny new urban corridor in Irvine now lined with high rise housing sits empty, with many units vacant and foreclosed. In nearby Santa Ana, twin 25-story residential towers sit eerily vacant with not a single unit sold or occupied. Central Park, a giant new urban project in Irvine that boasted dense high-rise, townhouse and mid-rise units, sits vacant behind green security fences.

    Where did the buyers go? Many young people moved back home with their parents when their high paying jobs in real estate or mortgage brokerage disappeared. With their jobs and income gone, they sought refuge in the safety of their childhood homes. Their parents ended any speculation of selling and down-sizing when their children returned. With job creation non-existent, they do not plan on leaving anytime soon. In one recent Pew study, 13 percent of parents with grown children reported one of their adult offspring had moved back home in the past year. Roughly half of the population 18 to 24 still lives with their parents.

    This stay-at-home trend predates even the recession. According to the U.S. Census Bureau, the national relocation rate in 2008 was the lowest since the agency started tracking the data in 1948. The rate was 11.9 percent in 2008, a decline from 13.2 percent in 2007. The 2008 figure represents 35.2 million people, which is the smallest number of residents to move since 1962. The number was 38.7 million in 2007.

    What about Grandma and, increasingly, even Grandpa? Our parents, thanks to the miracle of modern medicine, are living longer than ever. If she has reached age 65, she can expect to live another 20 years. Unfortunately, her retirement account and savings plan may not. Many Americans are living well into their 90s and we will see the first wave of centurions in our lifetime. No one expected this to happen and we are unprepared for it. Grandma will not be able to afford the $3,000 to $4,000 a month expense of a quality retirement facility – for 20 years.

    This changing dynamic will alter movement of Americans, which has now been slowing down for a generation. In 1970, nearly 20 percent of Americans changed their place of residence every year. But by 2004, that figure had dropped to 14 percent, the lowest level since 1950. The tough economy and aging demographics will slow migration down even more. Mom and Dad will not find it easy to take that new position in another city with the kids at home and now Grandma, and even Grandpa, too.

    This will have profound impact on the kind of housing Americans will want. Homebuilders may find lower demand for single family houses as America doubles up but it will be the much ballyhooed drive to urbanize America with dense high-rise units that is most in danger.

    Extended families will want larger – not smaller – houses. They may not be able to afford McMansions, but conventional suburban houses will be changed to meet the demands of extended families. Granny flats, consisting of self contained ground floor units, will be in demand as the baby boomer generation moves into retirement. Smaller single floor homes called Casitas will need to be mixed into planned developments so that the Grandparents can live closer to the children.

    City staff and urban planners, already grappling with a mandate to accommodate global warming and carbon footprints, will have to rethink existing zoning rules which have not yet responded to the new reality. This reality will be driven by aging demographics, diminished capital and the shifting plates of our economy. The baby boomer “bubble” that is now beginning to retire is a well established fact. Lesser known is the impact of the financial crisis on young workers who simply have been priced out of the housing market. Along the pricier coasts and Northeastern cities, they will need the down payment from their parents – who in exchange will live with their kids – to purchase their own home.

    The kids have already come home. Like the financial downturn, they will not be leaving anytime soon. Grandma is next in line. When she comes home, the circle will be complete, with consequences few in the real estate industry have yet to contemplate seriously.

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    This is the sixth in a series on The Changing Landscape of America. Future articles will discuss real estate, politics, and other aspects of our economy and our society.

    Robert J. Cristiano PhD is a successful real estate developer and the Real Estate Professional in Residence at Chapman University in Orange, CA.

    PART ONE – THE AUTOMOBILE INDUSTRY (May 2009)
    PART TWO – THE HOME BUILDING INDUSTRY (June 2009)
    PART THREE – THE ENERGY INDUSTRY (July 2009)
    PART FOUR – THE ROLLER COASTER RECESSION (September 2009)
    PART FIVE – THE STATE OF COMMERCIAL REAL ESTATE (October 2009)

  • For Millennials, It’s the Economy Stupid

    This month’s off year elections sent one message to Washington that has been heard loud and clear. Voters expect Congress to focus on the economy, especially employment, and take decisive and affirmative steps to deal with both the causes and ravages of the greatest economic downturn in the U.S. since the Great Depression. As the Obama administration considers a variety of new proposals to help bring down the unemployment rate, one key constituency is raising its voice and asking for a return on the investment it made in his presidency.

    Members of the Millennial generation, born between 1982-2003, who were eligible to vote in 2008 went for Barack Obama over John McCain by a 2:1 margin and made up over 80% of the President’s winning margin. They continue to support his presidency and identify as Democrats by similar margins. A late October Pew survey indicates that Millennials identify as Democrats over Republicans by almost 20 percentage points (52% vs. 34%), well above the 8-point Democratic advantage among older generations. In the latest Research 2000 weekly tracking survey conducted for Daily Kos, 80% of Millennials had a favorable opinion of the president; only 14% of everyone in this generation viewed him unfavorably. This compares with a 55% vs. 39% favorable/unfavorable ratio among the entire electorate in both the Research 2000 survey and in a series of November surveys conducted by organizations ranging from ABC News and the Washington Post to Fox, although some other polls put the President’s job performance ratings closer to 50%.

    But despite the clearly stronger support the President has among their generation, Millennials are increasingly restive about the lack of action in Congress to address the economic problems they face – both now and in the future.

    Recent Pew research studies underline the major impact that the recession has had on individual Americans and their families. Thirteen percent of parents with grown children told Pew researchers that one of their adult sons or daughters had moved back home in the past year. Pew found that of all grown children living with their parents, 2 in 10 were full-time students, one-quarter were unemployed and about one-third had lived on their own before returning home. According to the census, 56 percent of men 18 to 24 years old and 48 percent of women were either still under the same roof as their parents or had moved back home.

    The lack of jobs was particularly acute among adult members of the Millennial Generation (18-27 year olds), 61% of whom said that they or someone close to them was jobless recently. A clear plurality (46%) says that the “job situation” rather than rising prices (27%), problems in the financial markets (14%) and declining real estate values (7%) is their major economic worry.

    As a result, the number one concern among Millennials is the state of the economy and the need for jobs, but they have a unique perspective on how to deal with this issue.

    Millennials believe there is a clear link between education and employment and are increasingly concerned that the pathway through the educational system into the world of work is becoming increasingly more difficult and expensive to navigate. Last week, about one hundred of the nation’s top private sector and government leaders gathered for the Wall Street Journal’s CEO Council also identified education as the nation’s top economic priority.

    For Millennials, the problem is personal. A smaller share of 16-to-24-year-olds – 46 percent – is currently employed than at any time since the government began collecting that data in 1948. A job market with Depression-level youth unemployment (18.5%) and a wrenching transformation in the types of jobs America needs and produces makes the implicit bargain of education in return for future economic success harder for Millennials to believe in every day.

    Recently Matt Segal, Executive Director of the Student Association for Voter Empowerment (SAVE) and Founder and National Co-Chair of the “80 Million Strong for Young Americans Job Coalition” presented some ideas to the House Education and Labor Committee on what Congress could do to address this challenge. He advocated increased entrepreneurial resources be made available to youth; more access to public service careers through internships and loan forgiveness programs; and the creation of “mission critical” jobs in such fields as health care, cyber-security and the environment that would tap the unique talents of this generation. Since two-thirds of Millennials who graduate from a four-year college do so with over $20,000 in debt, debt, his testimony also urged immediate Senate approval of the student debt reform bill recently passed by the House.

    There is more that can be done beyond these excellent recommendations. This summer, the President’s Council of Economic Advisors released a report outlining the importance of community colleges in making America’s workforce more competitive in the global economy. “We believe it’s time to reform our community colleges so that they provide Americans of all ages a chance to learn the skills and knowledge necessary to compete for the jobs of the future.” The report urged Congress to pass House Democratic Caucus Chairman John Larsen’s bill, The Community College Technology Access Act of 2009, in order to help meet President Obama’s goal of graduating five million more Americans from community colleges by 2020.

    Millennials, like their GI Generation great grandparents in the 1930s, are facing economic challenges that caught them by surprise and for which no one prepared them. But Millennials aren’t looking for a handout or sympathy. Instead, in the “can do” spirit of their generation, they are organizing to overcome the challenges created for them by their elders. It’s time for the Democrats who control Congress to recognize these concerns and to act decisively on their behalf.

    Morley Winograd and Michael D. Hais are fellows of the New Democrat Network and the New Policy Institute and co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics (Rutgers University Press: 2008), named one of the 10 favorite books by the New York Times in 2008.