New Geography

Category: Economics

  • The Costs of Climate Change Strategies, Who Will Tell People?

    Not for the first time, reality and politics may be on a collision course. This time it’s in respect to the costs of strategies intended to reduce greenhouse gas emissions. The Waxman-Markey “cap and trade” bill still awaits consideration by the US Senate, interest groups – mainly rapid transit, green groups and urban land owners – epitomized by the “Moving Cooler” coalition but they are already “low-balling” the costs of implementation.

    But this approach belies a bigger consideration: Americans seem to have limits to how much they will pay for radical greenhouse emissions reduction schemes. According to a recent poll by Rasmussen, slightly more than one-third of respondents (who provided an answer) are willing to spend $100 or more per year to reduce greenhouse gas emissions. About 2 percent would spend more than $1,000. Those may sound like big numbers, but they are a pittance compared to what is likely to be required to meet the more than 80 percent reduction in greenhouse gas emissions that the Waxman-Markey bill would require. Even more worryingly for politicians relying on voters to return them to office, nearly two-thirds of the respondents would pay nothing to reduce greenhouse gas emissions.

    If we do a rough, weighted average of the Rasmussen numbers, it appears that Americans are willing to spend about $100 per household per year (Note 1). This includes everyone, from the great majority, who would spend zero to the small percentage who would spend more than $1,000. At $100 per household, it appears that Americans are willing to spend on the order of $12 billion annually. This may look like a big number. But it is peanuts compared to market prices for greenhouse gas emissions. This is illustrated by the fact that the social engineers whose articles of faith requires building high speed rail to reduce greenhouse gas emissions would spend $12 billion to construct just 150 miles of California’s proposed 800 mile system.

    Comparing Consumer Tolerance to Expected Costs: At $100 per household, Americans are prepared to pay just $2 per greenhouse gas ton removed. All of this is in a policy context in which the United Nations Intergovernmental Panel on Climate Change suggests that $20-$50 per greenhouse gas ton is the maximum that should be spent per ton. The often quoted McKinsey/Conference Board study says that huge reductions in greenhouse gas emissions can be achieved at $50 or less, with an average cost per ton of $17. International markets now value a ton of greenhouse gas emissions at around $20. At $2 per ton, American households are simply not on the same “planet” with the radical climate change lobby as to how much they wish to spend on reducing greenhouse gases.

    International Comrades in Arms? This is not simply about Americans and their perceived differences from others who are so often considered more environmentally sensitive. France’s President Sarkozy has encountered serious opposition in proposing a carbon tax on consumers to discourage fossil fuel use. He is running into problems not only among members of the opposition, but concerns have also been expressed by members of his own party. It appears that many French consumers (like their American comrades) are more concerned about the economy than climate change at the moment.

    China, India and Beyond: If only a bit more than one-third of American households are willing to pay much of anything to reduce greenhouse gas emissions, it seems fair to ask what percentage of households in China, India and other developing nations are prepared to pay anything? A possible answer was provided recently by India’s environment minister, Jairam Ramesh, who released a report predicting that India’s greenhouse gas emissions would rise from the present 1.2 billion tons to between 4 and 7 billion tons in 2030. The minister said the “world should not worry about the threat posed by India’s carbon emissions, since its per-capita emissions would never exceed that of developed countries.” . At the higher end of the predicted range, India would add more greenhouse gas emissions than the United States would cut under even the proposed 80 percent reduction scheme. Suffice it to say that heroic actions to reduce greenhouse gas emissions seem unlikely in developing countries so long as their citizens live below the comfort levels of Americans and Europeans.

    Lower Standard of Living not an Option: I have been giving presentations on this and similar subjects for some years. I have yet to discern any seething undercurrent of desire on the part of Americans (or the vast majority anywhere else) to return to the living standards of 1980, much less 1950 or 1750. Neither Washington’s politicians nor those in Paris or any other high income world capital are going to tell the people that they must accept a lower standard of living. Nor is there any movement in Washington to let the people know that their tolerance for higher prices could well be insufficient to the task.

    For Washington, the dilemma is that every penny of the higher costs will hit consumers (read voters), whether directly or indirectly. There could be trouble when the higher utility bills begin to arrive and it could mean difficulty in delivering on the primary policy objective of virtually all governments, which is to remain in power. This is not to mention the unintended consequences of higher prices on many key industries, notably agriculture, manufacturing, and transportation.

    There is an even larger concern, however, and that is the stability of society. Harvard economist Benjamin Friedman, in The Moral Consequences of Economic Growth suggested from an economic review of history that economies that fail to grow lapse into instability.

    A Public Policy Collision Course? A potential collision between economic reality and public policy initiatives could be in the offing. Many “green” proposals are insufficiently sensitive – even disdainful – towards the concerns of everyday citizens. This suggests that politically there should be an emphasis only on the most cost effective strategies. In a democracy, you must confront to the reality that people are for the most part more concerned about the economy than about strategies meant to slow climate change.

    The imperative then is not to ignore the problem, but to focus on the most rational, low-cost and effective greenhouse gas emission reduction strategies. Regrettably, it does not appear that Washington is there yet. The special interests whose agendas are to cultivate and reap a bounteous harvest of “green” profits or to convert the “heathen” to behaviors – such as riding transit and living in densely packed neighborhoods – that they have been advocating long before the climate change issue emerged.

    Those concerned about the future of the environment also have to pay attention to reality. Reducing greenhouse gases is not a one-dimensional issue. Environmental sustainability cannot be achieved without both political and economic sustainability.

    Note 1: The Rasmussen question was asked of individuals. It is assumed here, however, that the answers related to households. One doubts, for example, that a queried mother answered with an assumption that she would pay $100, her husband would pay $100 and each of the kids would pay $100, but rather meant $100 for the household, since, to put it facetiously, few households devolve their budgeting to the individual members.

    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.”

  • The Kid Issue

    Japan’s recent election, which overthrew the decades-long hegemony of the Liberal Democratic Party, was remarkable in its own right. But perhaps its most intriguing aspect was not the dawning of a new era but the emergence of the country’s low birthrate as a major political concern.

    Many Japanese recognize that their birth dearth contributes to the country’s long-standing economic torpor. The kid issue was prominent in the campaign of newly elected Democratic Party Prime Minister Yukio Hatoyama, who promised to increase the current $100 a month subsidy per child to $280 and make public high school free. The Liberal Democrats also proposed their own pro-natalist program with a scheme for free child day care.

    Japan’s predicament seems obvious. Its fertility rate has dropped by a third since 1975. By 2015 a full quarter of the population will be over 65. Generally inhospitable to immigrants, Japan could see its population drop from a current 127 million to 95 million by 2050, with as much as 40% of the population over 65 years of age. By then, no matter how innovative the workforce, Dai Nippon will simply be too old to compete.

    While Japan’s demographic crisis is an extreme case, many countries throughout East Asia and Europe share a similar predicament. Even with its energy riches, Russia’s low birth and high mortality rates suggest that its population will drop 30% by 2050 to less than one-third of that of the U.S. Even Prime Minister Vladimir Putin has spoken of “the serious threat of turning into a decaying nation.”

    Russia’s de facto tsar has cause for concern. Throughout history low fertility and socioeconomic decline have been inextricably linked, creating a vicious cycle that affected once-vibrant civilizations such as as ancient Rome and 17th-century Venice.

    Persistently low birthrates and sagging population growth inevitably undermine the growth capacity of an economy. Children provide a large consumer market and push their parents to work harder. By having children, parents also make a commitment to the future for themselves, their communities and their country.

    In contrast, a largely childless society produces other attitudes. It tends to place greater emphasis on leisure activities over work. It also shifts political pressure away from future growth and toward paying pensions for the aging. An aging society is likely to resist risky innovation or infrastructure investments meant to serve future generations.

    Of course, on a global level, lower birthrates should be seen as a positive. Population growth projections made around the time of The Population Bomb, Paul Ehrlich’s widely acclaimed 1968 Malthusian tract, which predicted global mass starvation, have turned out to be well off the mark. Global population growth rates of 2% in the 1960s have dropped to less than half that rate, and projections of the number of earth’s human residents in 2000 overshot the mark by over 200 million.

    This pattern is likely to continue: growth rates will drop further largely due to an unanticipated drop in birthrates in developing countries such as Mexico and Iran. These declines are in part the result of increased urbanization, the education of women and higher property prices. The world’s population, according to some estimates, could peak as early as 2050 and begin to fall by the end of the century.

    Yet in some places, like Japan, declining birthrates may already be too much of a good thing. The same is true elsewhere in East Asia, particularly in China, where the one-child policy has set the stage for a rapidly aging population by mid-century. Fertility is particularly low in highly crowded Asian cities like Tokyo, Shanghai, Tainjin, Beijing and Seoul.

    Over the past few decades a rapid workforce expansion fueled the rise of the so-called East Asian tigers, the great economic success story of the late 20th and early 21st centuries. But within the next four decades most of the developed countries in East Asia, as well as Europe, will become veritable old-age homes: A third or more of their populations will be over 65, compared with one in five in the U.S.

    Not that the U.S. doesn’t also have to cope with an aging population and lower population growth. But comparatively speaking it maintains a relatively youthful, dynamic demographic. Its fertility rate is about 50% higher than Russia’s, Germany’s or Japan’s and well above those of China, Italy, Singapore, Korea and virtually every country in the former eastern Europe.

    The reasons for this divergence with other advanced countries likely includes such things as continuing immigration, more land, larger houses, a strong aspirational culture and a higher degree of religious affiliation. Whatever the cause, a younger demography could lead to a relatively brighter future for America than is now commonly assumed.

    Additionally, in the next decade the U.S. will benefit from a millennial baby boomlet, as the children of the original boomers start having offspring. This next surge in population may be delayed if tough economic times continue, but over time it will translate into a growing workforce, sustained consumer spending and will likely spur a rash of new creative inputs.

    On the surface, these trends should help America to maintain a growing economy while its main competitors fade. By 2050 Europe’s economy could be half that of the U.S. But this is not inevitable. As in Japan, some leaders in European countries understand they cannot sustain prosperity with a steadily declining workforce.

    Many European countries are boosting benefits for families. In some, a pro-natalist policy is also being driven by concerns about the preservation of national cultures. In contrast to America, a country defined by immigration, most European countries – as well as Japan, China and Korea – have been far more resistant to outside influences.

    The rise of immigration in recent decades has led to growing European nativist movements. Many Europeans, including liberal ones, are less than sanguine about the long-term consequences of Muslim birth rates now three times higher than those of indigenous Europeans. If current trends continue, according to the Brookings Institution, the Muslim population of Europe could double by 2015 while the non-Muslims shrink by 3.5%. Without a sustained boost in baby-making among native Europeans, much of the continent may soon confront the prospect of an essentially Islamic future.

    But even so, attempts to foster a revival in European birthrates will face strong opposition from environmental activists who have amassed enormous influence. Some consider procreation of carbon-belching E.U. citizens as something close to anathema. In Great Britain, Jonathan Porritt, chair of the U.K.’s Sustainable Development Commission has advocates cutting the island’s population in half as a way to reduce global greenhouse gases.

    For their part, some America greens have expressed concern over our country’s relative fecundity. The president’s science adviser, John Holdren, a longtime protégé of Malthusian prophet Ehrlich, has in the past spoken about the need to limit families to two children. On the right, nativists also fear that too much of our new population will be of Asian or Hispanic descent.

    These pressures could lead to curbs on immigration, which would slow population growth. Other steps being considered by administration planners, such as cramming Americans into smaller houses in urban centers, would clearly discourage family formation. A persistently weak economy would do the same.

    Yet those favoring strong steps to curb population here first should think of the consequences. As the Japanese increasingly recognize, it’s better to experience some population growth than to become a giant nursing home. A somewhat youthful, gradually growing population certainly may create considerable environmental and social challenges, but a scenario of persistent decline and rapid aging seems far worse.

    This article originally appeared at Forbes.

    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.

  • Alaska To Stimulus Funds: Yup, We’ll Take ‘Em

    Earlier this month the Alaska state legislature, in a special session, voted 44-14 to accept $28.6 million in stimulus funds that Sarah Palin had rejected in May. Sean Parnell, Alaska’s governor since Palin’s resignation, says the money will be used primarily for energy efficiency improvements in public buildings.

    The tale of the showdown between Palin, the state legislature, and the federal Department of Energy may ultimately reveal as much about state sovereignty under the current administration in Washington as it does about Alaska’s internal politics.

    Palin has more than once made her case for rejecting the stimulus money — or at least a portion of it — clear: her objection is that the American Recovery and Reinvestment Act calls for the adoption of the International Energy Conservation Code in exchange for the funds, which would set new standards for things like window fenestration and lighting equipment in new and remodeled commercial and residential buildings. Such codes, however, could be a logistical nightmare for some communities to adopt and for the state to enforce.

    Alaskan buildings are architecturally diverse, each constructed for a particular climate and geography. Homeowners in Ketchikan, for example, where it rains nearly every day of the year, have different concerns than those in Valdez, where the average yearly snowfall is 325 inches. Many communities in the state are only accessible by boat or plane, so the shipping of supplies is costly and inefficient. Economic hardship and subsistence are also the normal standard of living in many of the remote, rugged Alaskan towns and villages.

    Because of these circumstances, the state has always permitted local governments to set their own building codes. Most of the villages choose not to have building codes at all. All things considered, monitoring energy code compliance in perpetuity would easily cost the state more than $28.6 million. Palin also has noted that the state has hundreds of millions of dollars already budgeted for energy efficiency and renewable energy projects, so the less than $30 million in stimulus funds really aren’t a substantial addition to the state’s effort.

    Her rejection of the funds sparked a debate that was carried out in press releases, official letters, and Anchorage Daily News editorials. A legislator from Anchorage claimed in an op-ed piece that Palin was “denying” Alaskans much needed funds, and that rejecting money from the stimulus package brings to mind the old saying, “two wrongs don’t make a right.” The co-chairs of the state senate resources committee wrote a letter urging Palin to consider Missouri’s proposal (accepted by the Department of Energy) which would fulfill the mandate with a 90% compliance rate on the local level, exempting communities with populations under 2,500 and structures without plumbing and electricity. There are enough major Alaska communities that have already adopted energy codes, they said, that the state either already meets or could easily meet the federal requirements in the necessary time frame.

    Palin responded to these opponents with her own editorial and press releases, and an Anchorage architect agreed with her in another op-ed, suggesting that while Alaska has long built energy efficient buildings out of cold weather necessity, the two senators’ numbers for 90 percent compliance didn’t add up. The primary result of taking the money, he claimed, would be “a new regulatory requirement to verify compliance.”

    The disagreement hinged on everyone’s interpretation of the DOE’s language. The initial mandate required “assurances” from the governor that local communities with the authority to do so “will implement” the codes. Because there is no statewide energy code in Alaska and the state constitution supports local self-government, Palin took the stance that this requirement would put her outside of her jurisdiction as governor. She and her staff exchanged letters with the DOE in attempt to clarify the possibility of the Missouri option, and the degree to which the state would be required to oversee code implementation and compliance.

    The DOE admitted that the code mandate wasn’t appropriate for all states, but said the Missouri option was part of the Missouri governor’s “broader commitment” to “work proactively” with communities and the legislature to improve energy efficiency, implying, perhaps, that despite Alaska’s success in these areas, the governor’s personal involvement was non-negotiable. Revisions were offered, but Palin was still dissatisfied with the DOE’s language. Proponents of taking the money suggested that the DOE’s revisions required the governor to work “within the extent of her authority” to promote the building codes, not to actively enforce them. Palin didn’t agree with this interpretation, saying she didn’t want the role of dictating or influencing local policies.

    As a state with a cold climate and an economy vulnerable to volatile fuel prices, Alaska has indeed taken its own steps to improve energy efficiency in recent years. In addition to independently adopted energy codes in most of the major cities and hundreds of millions budgeted for state energy projects, there has been an admirable home energy rebate program in place for several years; homeowners can have their houses audited for energy efficiency and be reimbursed up to $10,000 for making recommended improvements.

    It’s hard to imagine, though, that the legislature’s motives in opposing Palin’s decision were entirely pure. Palin and the legislature had a combative relationship over budget issues for most of her tenure as governor, and this was an opportunity for them to demonstrate their clout. It’s telling, too, that the legislature rejected Parnell’s proposal to extend their special session (which was held primarily to overturn Palin’s veto) by one day in order to extend a year-long suspension of the state’s 8-cent gas tax, which will now be reinstated September 1. The legislature may choose to suspend the gas tax again when the regular session begins in January, but their lack of urgency to act on the issue undermines their claim that the stimulus funds are urgently necessary to help keep Alaskans’ energy costs down.

    Of course, Palin’s own stance has been calculated as well. She initially wanted to decline roughly half of Alaska’s $930 million allotment, and her vocal anti-stimulus statements garnered national attention, which helped establish her as a critic of the Obama administration in her own right, independent of her role in McCain’s presidential campaign. By the time the smoke cleared, however, she was rejecting only this $28.6 million. Critics have said that it looks like a token amount, chosen to make a strategic political statement.

    In her op-ed piece, she noted that during her time as a Wasilla city council member and then mayor, the city experienced a boom in growth that made building codes an issue of great contention. Wasilla is notably missing on the list of major communities that have independently adopted energy codes, which would suggest that it would be one of the key cities that would have problems with a statewide energy code.

    After the legislature’s vote, Sean Parnell wrote to the DOE accepting the funds, noting his own disapproval of the mandates. He quoted an August DOE statement that the state legislature “does not need to adopt, impose and enforce a statewide building code in order to qualify,” making clear that he was accepting the funds on the basis of that statement. He also provided the DOE with “assurances”, not that state or local codes would be adopted, but that the Regulatory Commission of Alaska “will seek to implement general policies to promote energy efficiency and maintain just and reasonable rates while protecting the public.”

    Ultimately, if Alaska holds its ground and does not adopt the IECC, Palin and the legislature may have unwittingly conspired to successfully challenge the federal government’s encroaching influence on the state’s affairs. Perhaps not coincidentally, the legislature unanimously passed a 10th amendment state sovereignty resolution while they were hashing out the stimulus funds controversy, and Palin signed it weeks before resigning as governor. It will be interesting to see how the DOE handles Alaska’s obstinance…and how the Alaska legislature responds if the DOE calls their bluff down the road and asks how the codes are coming along.

    Andrea Gregovich is a writer and translator living in Anchorage.

  • China’s Metropolitan Regions: Moving Toward High Income Status

    Changsha, Hunan (China): Over the past 30 years, China has eradicated more poverty than any nation in the world’s history. The reforms instituted by Deng Xiaopeng have not only created a large, new middle class in China, but have also produced some of the largest and architecturally most impressive urban areas in the world. There is still poverty in China, but the most extreme poverty is in the rural areas. The expansive shanty-town poverty found in Manila, Jakarta, Mexico City, Sao Paulo or Mumbai is absent in the large Chinese urban areas.

    While China as a nation is growing slowly, the same cannot be said of its urban areas. Perhaps the greatest migration in human history is underway, as rural residents move to the urban areas. United Nations population projections indicate that China will add 310 million people to its urban areas over the next 25 years, a figure equal to the population of the United States.

    Gross Domestic Product in Chinese Cities: China has seen its incomes and gross domestic product increase markedly. Urban economic growth has been even greater than that of the country as a whole. This article contains the latest available information on gross domestic product for the largest prefectural and provincial level cities in China, derived from annual yearbooks (see Table). It needs to be understood that “cities” are much different in China than anywhere else.

    The Differing Definitions of “City”: The most commonly used definition of a city in China is more akin to a large metropolitan region in the United States or Europe. Some cities, like Shanghai, Beijing, Tianjin and Chongqing are the equivalent of provinces, while other cities are “prefectural level,” administering large areas within provinces (Note 1). Each of these “cities” is comprised by smaller jurisdictions that go by at least 8 names, including city districts and “county level cities,” which are cities within the city, but not the main urban areas. Much of the land area in county level cities and even inside some city districts is rural rather than urban. As a result, analysts who should know better often make downright silly comparisons between Chinese cities and other cities in the world, simply because they do not understand the differing meaning of the term. Nearly all of China, urban and rural is broken into prefectural or provincial cities, just as nearly all of the United States is divided into counties.

    The large rural areas within the cities reduce the overall GDP per capita because incomes are generally so much lower outside the urban areas.

    Geographical Distribution of Wealth: China purposefully began its most significant reforms on the east coast, which is where much of the wealth of the nation is concentrated. All 25 of the most affluent metropolitan regions are on the east coast and 14 of the richest 20 metropolitan regions in China (measured by GDP per capita) are in the two river delta mega-regions, the Pearl and the Yangtze.

    The Pearl River Delta: China’s richest area is the Pearl River Delta, home of formerly British administered Hong Kong, Deng Xiaopeng’s megacity Shenzhen and historic Guangzhou (Canton). The area is one of the world’s great mega-regions, with a population of more than 50 million, in 8 virtually adjacent urban areas, tied together by a modern freeway system. Altogether the Pearl River Delta urban areas have more people than the world’s largest single urban area, Tokyo, and an overall higher density.

    Hong Kong, which remains outside the normal provincial governance structure, had the highest GDP per capita in the nation at $42,200 (purchasing power parity) in 2007, slightly more than 90 percent of the United States. Hong Kong and formerly Portuguese Macau have both achieved first world economic status, though Macau does not make the 1,000,000 urban area population threshold for inclusion on the present list.

    Shenzhen, on Hong Kong’s northern border ranks 4th in the nation at $22,100 and Guangzhou 5th, at $19,900. Two other Pearl River Delta metropolitan regions, Foshan, Zhuhai, have GDPs per capita greater than $15,000, which by some accounts qualifies them for entry into the high income world. The remaining large Pearl River Delta metropolitan regions, Dongguan, Zhongshan and Jiangmin each have GDPs per capita exceeding $10,000.

    The Yangtze River Delta: The Yangtze River Delta is another great mega-region, with more than 30 million people. It, however, covers much more land area than the Pearl River Delta and has much greater expanses of rural territory. The Yangtze River Delta metropolitan region of Suzhou, the city of canals, and neighbor of Shanghai, has the highest GDP per capita outside Hong Kong, at $25,500. One county level city within Suzhou, Kunshan has a GDP per capita of more than $28,000 (Note 2). Suzhou’s neighbor on the way to Nanjing, Wuxi, is next at $23,300. Shanghai, China’s largest metropolis, ranks 6th in GDP per capita at $18,400. Other Yangtze Delta metropolitan regions have GDPs per capita between $10,000 and $15,000, including Nanjing, Hangzhou, Changzhou and Ningbo.

    The Beijing Metropolitan Region: China’s third mega-region is around Beijing, the national capital. Altogether, this region has nearly 25 million people, but like the Yangtze River Delta, the Beijing megaregion has large swaths of rural territory. Beijing itself has a GDP per capita of $16,200, while Tianjin and Tangshan (site of the 1976 earthquake, one of history’s worst, which killed at least 250,000 people) have GDPs per capita of between $10,000 and $15,000.

    Outside the Megaregions: While the wealth is concentrated in the three large megaregions, prosperity has come to other metropolitan regions as well. One of Deng Xiaopeng’s original special economic zones, along with Shenzhen, was Xiamen, which is the richest metropolitan region outside the three large megaregions.

    Prosperity Comes to the West: The interior metropolitan regions are now well on their way to sharing the prosperity of the east. Changsha, from where I write, is now served by the nation’s “interstate” highway system in all directions. At the end of 2008, this system had expanded to 37,000 miles. Eventually, 53,000 miles are planned, which would make it longer than the present 46,000 mile US interstate system. This national expressway system is a pivotal factor in bringing prosperity to the interior. Now, trucks can reach Pacific Coast ports such as Guangzhou, Fuzhou or Hangzhou in six to nine hours of driving. This makes it possible for manufacturing businesses to locate in Changsha, Xi’an or Wuhan and a number of other metropolitan regions that are well inland.

    This should be of inestimable help as the nation seeks to decentralize its urban growth to the interior urban areas. Changsha, itself, has moved strongly into middle income status, with a GDP per capita closing in on $10,000. Moreover, local officials are planning for a near doubling of the current 2.5 million population in the next two decades. At least three major new towns under construction on the urban periphery and another will be built where the borders of three prefectural cities meet: Changsha, Zhuzhou and Xiangtan which is the birthplace of Chairman Mao Zedong (about 50 miles from Changsha, just off the Shangrui Expressway).

    Chongqing (formerly known in the west as Chungking), one of the four provincial level municipalities, has low GDP per capita of less than $5,000. However, this figure is skewed low by the fact that the urban area itself accounts for approximately one-sixth of the provincial city’s population, with the bulk of the population in the far lower income rural areas. Chongqing provides the ultimate evidence that cities in China are like nowhere else in the world. The “city” of Chongqing has a population of more than 30 million, in a land area the size of Austria or Indiana. The actual urban area, however, covers less area than the Indianapolis urban area and only 1.5 times the area of the Vienna urban area.

    Toward a High Income Nation: The urban areas of China still have poverty, but the commercial and residential development (both high rise and detached “villas”) make it clear that a great many people are doing “very well.”

    China is moving hard toward high-income world status. I specifically avoid the term “first world,” because metropolitan China already feels first world, regardless of its income status. However, should current growth rates continue relative to the high income world, metropolitan regions such as Suzhou and others could move into the list of the world’s 100 most affluent metropolitan areas within a decade. It cannot happen too soon.

    Note 1 : This includes sub-provincial level cities, which have jurisdiction over virtual prefectures within provinces, however have more administrative independence than prefectural level cities.

    Note 2: GDP per capita data is not widely available for divisions within prefecture and provincial level cities

    China Metropolitan (City) Regions Gross Domestic Product: 2007
    Provincial, Sub-Provincial & Prefectural Level Cities
    Purchasing Power Parity (US$)
    RANKED BY GDP/CAPITA GDP/Capita
    Rank Metropolitan (City) Regions ¥ (RMB) US$ PPP
    1 Hong Kong $42,200
    2 Suzhou, JS ¥91,900 $25,500
    3 Wuxi, JS ¥83,900 $23,300
    4 Shenzhen, GD ¥79,600 $22,100
    5 Guangzhou, GD ¥71,800 $19,900
    6 Shanghai, SHG ¥66,400 $18,400
    7 Zhuhai, GD ¥61,700 $17,100
    8 Foshan, GD ¥61,200 $17,000
    9 Beijing. BJ ¥58,200 $16,200
    10 Xiamen, FJ ¥56,200 $15,600
    11 Nanjing, JX ¥53,600 $14,900
    12 Changzhou, JS ¥52,800 $14,700
    13 Hangzhou, ZJ ¥52,600 $14,600
    14 Handan. HEB ¥51,900 $14,400
    15 Dalian, LN ¥51,600 $14,300
    16 Ningbo, ZJ ¥50,500 $14,000
    17 Zhongshan. GD ¥49,500 $13,700
    18 Tianjin. TJ ¥46,100 $12,800
    18 Dongguan. GD ¥46,000 $12,800
    20 Shenyang, LN ¥45,600 $12,600
    20 Qingdao. SD ¥45,400 $12,600
    22 Tangshan. HEB ¥44,700 $12,400
    23 Zibo, SD ¥43,500 $12,100
    24 Yantai, SD ¥41,300 $11,500
    25 Huizhou, GD ¥41,000 $11,400
    26 Baotau, NM ¥40,400 $11,200
    26 Shijiazhuang. HEB ¥40,300 $11,200
    28 Jinan, SD ¥39,300 $10,900
    29 Anshan, LN ¥38,400 $10,700
    30 Jiangmen, GD ¥37,800 $10,500
    31 Taiyuan. SAX ¥36,400 $10,100
    32 Wuhan. HUB ¥35,600 $9,900
    33 Hohhot, NM ¥34,900 $9,700
    34 Zhengzhou, HEN ¥34,100 $9,500
    35 Changsha. HUN ¥33,700 $9,400
    36 Urumqi, XJ ¥31,100 $8,600
    37 Nanchang, JX ¥30,500 $8,500
    38 Fuzhou, FJ ¥29,500 $8,200
    39 Changchun, JL ¥28,100 $7,800
    40 Hefei. AH ¥27,600 $7,700
    41 Wenzhou. ZJ ¥27,500 $7,600
    42 Baoding, HEB ¥27,100 $7,500
    43 Haikou, HA ¥26,700 $7,400
    43 Chengdu, SC ¥26,500 $7,400
    45 Lanzhou, GS ¥25,600 $7,100
    46 Luoyang. Hen ¥25,100 $7,000
    47 Harbin, HL ¥24,700 $6,800
    47 Fushun, LN ¥24,500 $6,800
    49 Jilin, JL ¥23,300 $6,500
    50 Xiangfan, HUB ¥22,500 $6,200
    51 Xi’an, SAA ¥21,300 $5,900
    52 Liuzhou, GX ¥20,700 $5,800
    53 Guiyang, GZ ¥19,500 $5,400
    54 Xuzhou, JS ¥19,200 $5,300
    55 Kunming, YN ¥18,800 $5,200
    56 Shantou, GD ¥17,000 $4,700
    57 Linyi, SD ¥16,300 $4,500
    58 Nanning, GX ¥15,800 $4,400
    59 Datong, SAX ¥15,600 $4,300
    59 Huiayn, JS ¥15,500 $4,300
    61 Chongqing, CQ ¥14,700 $4,100
    62 Qiqihar, HL ¥10,000 $2,800
    Sources: Annual statistical reports, generally from http://www.chinaknowledge.com
    GDP PPP calculated from 2007 International Monetary Fund data
    Caution: In some cases, GDP per capita may exclude temporary residents
    Includes all provincial, prefectural level and sub-provincial level cities and special economic regions on the mainland with a core urban area of more than 1,000,000 population (see http://www.demographia.com/db-worldua.pdf).
    Note: Cities in China are substantially different in definition than in other nations. See: http://www.demographia.com/db-define.pdf.
    Provincial abbreviations at db-china-abbr.pdf

    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.”

  • World Capitals Of The Future

    For most of those which were great once are small today; And those that used to be small were great in my own time. Knowing, therefore, that human prosperity never abides long in the same place, I shall pay attention to both alike

    –Herodotus, Fifth Century B.C.

    If the great Greek chronicler and “father of history” Herodotus were alive today, he would have whiplash. In less than a lifetime, we have seen the rapid rise of a host of dynamic new global cities – and the relative decline of many others. With a majority of the world’s population now living in cities, what these places do with their new wealth ultimately will shape this first truly urban century.

    Just 25 years ago, when you walked down the Bund in Shanghai, there were few cars and no modern towers. The rough sidewalks expanded into the streets to accommodate a mass of poorly dressed pedestrians. A decade later, Moscow was in the midst of a particularly grungy interlude, filled with stolid people waiting in lines for shoddy consumer goods. You could hail a cab, and pay for it, with a pack of Kents.

    Today, these two cities have emerged from their socialist shackles with scores of high-rise projects either already up or on the drawing board. This, of course, has come with a price; Moscow hotel accommodations – cheap if dingy a quarter century ago – last year ranked as the world’s most expensive. Shanghai, meanwhile, has bustling traffic, a new subway and a 100-story office tower; it is about to begin construction on another that tops out at 121 stories.

    Also remarkable: the rise of other great cities – Mumbai, Bangalore and Hyderabad in India; Beijing; Sao Paulo, Brazil; and Dubai – that a quarter century ago were either obscure or better known for their destitution than their rapid construction.

    Of course, none of these cities’ wealth or economic power have passed leading global centers like Tokyo, London, Paris, New York, Chicago, Los Angeles, Seoul, Singapore and Hong Kong. But our list of emerging global cities is clearly gaining on them – and with remarkable speed.

    The main reason lies in economic fundamentals. Over the past 25 years, per capita income, based on purchasing power parity, grew by over 400% in India and a remarkable 1,500% in China. The bulk of that wealth came from urban centers like Mumbai and Shanghai, while the largest concentrations of poverty remained in the countryside. In that same period, U.S. per capita income grew by 245%; growth in most Western European nations was less than that.

    The nascent recovery in the world economy will certainly amplify these trends. China, as opposed to the U.S., is leading the economic resurgence, drawing in commodities from its rising business partners in all continents.

    For the most part, basic industries lead the way. Manufacturing has propelled the rise of the great Chinese cities. In Brazil, Sao Paulo’s growth spans everything from shoes and aerospace to technology. The city also dominates Brazil’s growing energy sector, both renewable and traditional. Energy – overwhelmingly of the fossil fuel variety – has powered the rise of Moscow and Dubai. It’s not always pretty. As the old Yorkshire saying has it, where there’s muck, there’s brass.

    Of course, the past year’s drop in oil prices has set back things a bit. California real estate investor Bob Christiano notes that more than half of the construction projects in the United Arab Emirates – worth $582 billion total – were put on hold in 2008. But now that the price of oil seems back on the rise, you can expect things to perk up in places like Dubai, Moscow and Sao Paulo.

    Not all our emerging cities are in the developing or former Communist world. North America boasts at least three genuine emerging world cities: Calgary, in Canada, and Houston and Dallas. These regional economies have been built around energy and expanding industrial power. They also have enjoyed rapid population growth. Last year, Houston and Dallas grew more than any other metropolitan region in the country; over the past decade, their populations have increased six times more rapidly than New York, Los Angeles, Chicago or San Francisco.

    But it’s not all a demographic game; cities like Phoenix and Las Vegas have similarly enjoyed rapid growth but do not fit on the rising global cities list. The key difference lies in the Texan cities’ rising corporate power. Houston, with 27 Fortune 500 firms, has passed Chicago in the number of Fortune 500 companies, while Dallas, with 14, ranks third. Together, the two Texan cities account for about as many Fortune firms as New York, once home to almost a third of the nation’s largest companies.

    Similarly, Calgary has become Toronto’s main challenger for corporate headquarters in Canada, a move sparked not only by oil wealth but lower taxes and regulation. The region now easily boasts the highest per capita income in the country. Its long-term main rival in growth may prove to be provincial cousin Edmonton, which sits closer to Alberta’s massive oil sands deposits.

    In Australia, Perth, located on the Indian Ocean and close to critical commodities such as iron ore, has also emerged in a big way. Australia’s richest city has become a major urban threat to long-established Sydney and Melbourne, with growth driven both by domestic as well as foreign migration and development.

    These emerging world cities also have survived the housing crisis much better than their national competitors. The growth of India and China has created an ever-richer market for commodities, as well as expertise residing in places like Perth, Calgary, Dallas and Houston, much of it built around commodity and resource extraction. The evolving ties between burgeoning world cities also spill over into the growing tourism industry in Perth and the expanding medical service complex in Houston.

    Another group flocking to the developing world’s super-stars: architects and civil engineers, many of them from more established first-world cities like New York, London, Los Angeles and San Francisco. Over the past 25 years, most of the biggest rail, road, airport and sanitation systems have been built not in Europe or America, but in East and South Asia, the Middle East and Brazil. Even as the West tries to work through its housing crisis, residential real estate prices are on the rise in cities like Mumbai, Bangalore, Beijing and Shanghai.

    The lure is irresistible, particularly for the young and ambitious. Just last month, Adam Mayer, a 20-something formerly employed architect from San Francisco, relocated to Beijing. He sees the chaos around him, but has plunged into the opportunity. “As I wait for our economy to recover,” he told me, “I am enjoying the ride as I witness perhaps one of the most compelling urban development stories of the 21st century.”

    High-rise office buildings have emerged as the biggest signs of the new order among global cities. Shanghai is already the fourth-tallest city in the world, with 21 buildings over 700 feet. Of the world’s 10 tallest buildings, only one – the former Sears (now Willis) Tower in Chicago – resides in the U.S. or Europe. There are now more tall buildings in Asia than in North America, and of the tallest 10 completed in 2006, four were in China and four in the Middle East. When completed, the Burj Dubai will stand as the world’s tallest.

    Although less awesome, the shift in skylines can also be seen in Russia. Until recently, Moscow had no buildings higher than the 787 feet of Moscow State University. Now, the Kremlin city has 14 towers complete or on the way, including one that will replace the current Naberezhnaya Tower; it will be Europe’s tallest building. Another project, a billion-dollar Chinatown, is being proposed with investors from China.

    Even with their rapid growth and increasingly modern gloss, these cities don’t tend to make the usual lifestyle-based “best cities” lists. Munich, Zürich, Copenhagen and Vancouver may be somnolent compared to Beijing or Bangalore, but they tend to be far wealthier, better organized, cleaner and safer – and they have far less poor people. Even our current global metropolises like Tokyo, London and New York have been able to hone the cultural amenities that make for a gracious urbanity.

    In contrast, by their very nature, boomtowns often give shorter shrift to the environment, the aesthetics of place and the more important aspects of community. Shaghai’s “tofu like” soil may not be ideal for massive high-rise buildings, just as some of Dubai’s buildings, some believe, may be helping to erode the Persian Gulf coastline.

    These upstarts are often too busy building and trying to impress the rest of the world to focus on architecture or plan niceties to make the heroic routine of everyday life more pleasant, notes London-based architect Eric Kuhne, who has worked on major projects in Moscow, Dubai and other Persian Gulf cities. Such places tend to be “abrupt and rude” in their development, but also “honest in every way” – they are the new kids on the block, with more money and power than seasoning.

    Like parvenus throughout history, Kuhne adds, these burgeoning power centers harbor “a desire to be seen as relevant, as ‘modern’, as shockingly new. In the stampede for a shining presence on the horizon, they both have been mesmerized…perhaps hypnotized…by their own profligacy of uncontrolled development.”

    Yet, Kuhne reminds us, you could have said the same thing about now-reigning world capitals like New York, London, Tokyo, Chicago or Los Angeles. These cities also “experienced a similar riot-panic in the post-war boom years of the ’50s. We destroyed the intricacy of centuries of urbanism [and] sacrificed community and family fabric for home ownership and autonomy.”

    Ultimately, the salvation for these cities may lie, Kuhne suggests, not in mimicry of Western ways but in drawing inspiration from their own ancient traditions. After all, Chinese, Arabs and Russians are not newcomers to city-building. But however they decide to build their new cities, these countries will be providing the blueprint for all of our urban futures.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a 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 early next year.

  • Beijing is China’s Opportunity City

    “What the Western fantasy of a China undergoing identity erasure reveals is a deep identity crisis within the Western world when confronted by this huge, closed, red alien rising. There is a sense that world order is sliding away from what has been, since the outset of industrialization, an essentially Anglo-Saxon hegemony, and a terrible anxiety gathers as it goes.” – Adrian Hornsby, “The Chinese Dream: A Society Under Construction”.

    One year after the conclusion of what may have been the most bombastic Olympic Games ever staged, the host city of Beijing has solidified its position as a growing influential global metropolis. While the rapid pace of change and development in China is well-documented by the Western media, the foreign consensus regarding The Middle Kingdom’s ascendancy to global super power remains decidedly ambivalent. Yet a closer look at China’s second largest city may yield a different, more promising outlook for this gigantic yet mysterious country.

    Much like London was to England in the 19th Century and Los Angeles was to the U.S. in the 20th Century, Beijing is today ground zero for opportunity in China. Shanghai holds on to its reputation as the country’s most cosmopolitan city and banking center, but Beijing continues to strengthen its role as political and cultural hub of China.

    To call Beijing an ‘opportunity city’ is counterintuitive based on its monumental physical characteristics and history as imperialistic capital. Home to the massive Forbidden City and the adjacent Tiananmen Square, the city is defined by a tradition of architectural pomposity. Continued today in buildings like the Olympic Bird’s Nest Stadium and the ominous CCTV Building, subtlety and grace are not Beijing’s strongest suits. Yet underlying these iconic structures is a restless population of 17 million, including many newcomers eager about the prospect of upward mobility.

    As construction of new buildings came to a screeching halt in the U.S. late last year, I also heeded the call of opportunity and headed to Beijing myself. My story is not unique in this regard as the phenomenon of recent American graduates moving to China for jobs was documented earlier this month in an article from the New York Times. Now working with a young, up-and-coming Chinese architecture firm, I am bearing first-hand witness to phenomenal changes.

    Problems exist of course, but criticizing Beijing or the rest of China from afar for its poor air quality or the rampant destruction of its old neighborhoods is too easy. The reality underlying these problems is much more complex, much of it depending on varying perspectives of how Westerners as opposed to Chinese view the country’s direction.

    For instance, Western planners and architects lament the razing of the charming alley and courtyard Hutong neighborhoods as significant losses of urban history. Yet most Chinese people view the process of destruction and rebuilding as a necessary piece of the modernization of their country. As 21-year-old film student and native Beijinger Ashley Zhang observes, “Although the loss of the Hutongs is sad, the reality is that most people would prefer to live in modern buildings where they do not have to go outside and use a shared bathroom or live in an old structure where they are going to be cold during the winter.”

    Other Beijingers have noted how owners of homes in Hutongs are more than willing to trade in their digs for large paydays. Ms. Zhang went on to explain to me that a “change in accommodations will not necessarily alter the spirit or the culture of the Chinese people”. This presents a markedly different perspective from the Western view on the relative importance of permanence in the built environment.

    It could be argued that a true sense of Chinese-ness exists more in the tradition of language and cuisine than in the built form. As such, the new and prolific building and infrastructure projects of China represent more a desire to join the modern world rather than to celebrate its architectural history.

    Yet to say that there is no urban planning in Chinese cities would be off the mark. As put forth by the Beijing Municipal Commission of Urban Planning in 2004, the ‘Beijing 2020 Masterplan’ calls for high intensity development eastwards towards Tianjin and low intensity development westward towards the mountains. The ‘Two Axes, Two Corridors – Multicenters’ Plan’ aims at relieving congestion towards the historic center of Beijing by strengthening outlying polycenters.

    Lisa Friedman of the New York Times recently lambasted the city’s development pattern as Beijing locking itself into a pattern of Los Angeles-type sprawl. In fact, Beijing’s polycentric development can be attributed to the fact that the historic core of the city is already well defined and remains off-limits to new development.

    Also, contrary to most American cities, the designated ‘Central Business District’ lies east of the center of the city. Concentrations of jobs form other business ‘nodes’ in all directions around Beijing. This is not due to any desire to copy Los Angeles per se but rather because the city is gaining tremendously in population and must ‘sprawl’ in order to accommodate these newcomers. In addition, businesses prefer to set up shop in places where land is cheaper.

    Detractors of rapid urban development like to note how sprawl creates unbearable automobile traffic. Yet they forget that the first great exemplars of “sprawl” – London and Los Angeles – did so with massive commuter rail systems long before the rise of LA’s freeway system or London’s ring roads.

    In fact what you have in Beijing is sprawl abetted by a Metro system that would be the envy of American public transportation enthusiasts. There are currently six subway lines operating in the city and in addition, 10 new lines which are under construction are all slated to be completed by 2015. In the end, Beijing’s rail network will constitute 350 miles of track. Compare that to Los Angeles, which destroyed its own huge rail system in favor of buses, where a planned ‘subway to the sea’ consisting of a mere 14 miles of rail is estimated to not be completed until the year 2036.

    Beijing is well on its way to ‘megacity’ status. Along with the city of Tianjin, about 70 miles southeast of Beijing, the Beijing-Tianjin mega-region will be one of the largest in the world. Tianjin, as the fifth-largest city in China and boasting a population of about 11.5 million residents, is going through a building boom of its own. Acting as Beijing’s main port, the two cities together form an economic powerhouse. The marriage between the two cities was consummated a year ago with the opening of the 350 km/h (217 mph) Beijing-Tianjin Intercity Rail – reducing travel time to a mere 30 minutes. I rode this train myself recently and had to cover my eyes from the constant flashbulbs going off recording the speedometer on the monitor in the front of our car.

    China has come a long way since the days of Chairman Mao’s ‘Great Leap Forward’. Although still ‘Communist’ in terms of a political system of one-party rule, traversing the streets of Beijing gives the impression that China may in fact be the most capitalist place on earth. From weather-worn women selling fruit to crafty young men hawking fake watches and pirated DVDs, no piece of the city is off-limits to commerce.

    There’s a huge generation gap between the younger generations and those who were unfortunate enough to have lived through the Cultural Revolution. But I would warn Westerners to not be fooled into thinking that China will forever be just a ‘cheap place to manufacture things’. The country is still very young, and as more young people get educated and travel abroad, China will evolve into an important player in everything from architectural design to green technology and the arts. At that point in time, sadly, there will no longer be any need for ‘Western experts’ like me. But for the time being, as I wait for our economy to recover, I am enjoying the ride as I witness perhaps one of the most compelling urban development stories of the 21st Century.

    Adam Nathaniel Mayer is a native of the San Francisco Bay Area. Raised in Silicon Valley, he developed a keen interest in the importance of place within the framework of a highly globalized economy. Adam attended the University of Southern California in Los Angeles where he earned a Bachelor of Architecture degree. He currently lives in Beijing, China where he works in the architecture profession.

  • High Cost of Living Leaves Some States Uncompetitive

    Late this spring, when voters in California emphatically rejected tax increases to close the state budget gap, they sent a clear message to state policymakers. They were tired of California’s high taxes, which according to the non-partisan Tax Foundation, consumed 10.5 percent of state per capita income last year. This compared with a national average of 9.7 percent, making California the sixth most heavily taxed state in the nation.

    But if Californians were tired of paying an additional 0.8 percent of their income in state and local taxes, what would they make of research by economists at the federal Bureau of Economic Analysis that estimated that the cost of living in California, based on 2006 data, was a whopping 29.1 percent above the national average? Obviously, from an economic point of view, the state’s high cost of living has a much greater impact on the average person’s standard of living than taxes do.

    Cost of living is not an issue that we typically think about, when it comes to voting and politics. That needs to change. Cost of living estimates provide a valuable tool for making accurate comparisons of economic performance. Moreover, they provide the best available, if indirect, measure of the costs imposed by regulation. And with Congress debating potentially dramatic changes in how we regulate energy and health care, costs of this kind clearly deserve close scrutiny.

    Let’s begin with economic performance, starting with California. According to 2006 census estimates from the American Community Survey, the median household income in California was $56,645. In terms of ranking, that made California the sixth most prosperous state in the nation. But how did California fare, once the cost of living was taken into account? The answer is not very well. The economists who published the 2006 data, Bettina Aten and Roger D’Souza, did not deflate income data by the full 29.1 percent when calculating the real effect of cost of living. Rather, they exempted certain components of income, such as government transfer payments. Using this attenuated calculation, real median household income in California in 2006 was $47,988. In terms of ranking, that dropped California down to 31st place. (Were the data deflated by the full 29.1 percent, the state would have fallen all the way to 48th place.)

    California is not the only state afflicted with an exorbitant cost of living. Bluer than blue New York State, according to the Aten and D’Souza data, had an even higher cost of living, estimated at 31.8 percent above the national average. And not surprisingly, it fared particularly badly, once the cost of living was taken into account. Again using an attenuated calculation, the median household income in New York dropped from $51,384 in nominal dollars down to $42,744 in cost of living adjusted dollars. In terms of rankings, this dropped New York from 17th place down to 49th place. (Were the data deflated by the full 31.8 percent, the state would have fallen to last place, almost 10 percent lower than the next poorest state, Mississippi.)

    What cost of living estimates taketh away from some, however, they also giveth to others. Consider, for example, Utah and Minnesota. In the case of Utah, median household income in 2006 stood at $51,309 in nominal terms. But according to the Aten and D’Souza estimates, the cost of living in Utah was 13.5 percent below the national average. Using the attenuated calculation, cost of living adjusted income in Utah was $57,147, the second highest in the nation.

    In the case of Minnesota, median household income in 2006 stood at $54,023 in nominal terms. But according to the Aten and D’Souza estimates, the cost of living was 7.4 percent below the national average. The attenuated calculation put the Minnesota a cost of living adjusted income at $57,140, third highest in the nation.

    As a general rule, the states with the lowest cost of living are states in the South and to a lesser degree the Mountain West. Among the states of the Old South, only Virginia had a cost of living above the national average. Dynamic states like North Carolina had a cost of living 13.1 percent below the national average. In Georgia, the figure was 12.1 percent. In the Mountain West, Idaho had a cost of living 17.3 percent below the national average. In New Mexico, the figure was 16.5 percent.


    Besides affecting the true measure of economic performance, cost of living differentials have other, important implications as well. Federal taxes are one example. Consider New York. For years, it has been recognized that New York State sends more in taxes to Washington, D.C. than it receives back in the form of federal outlays. Recently, there has been some disagreement about the size of this deficit, but in the past it was generally agreed that it amounted to approximately two percent of Gross State Product. If New Yorkers were truly rich, this would not be a great burden. But as shown already, that is not the case. By failing to control its cost of living, New York ends up subsidizing other states that in real terms are doing much better.

    Another implication of cost of living differentials has to do with population. All things being equal, people will live where they can maximize their standard of living. Not surprisingly, states that have seen the largest population growth in recent decades tend to be those with a low cost of living, notably in the South and in the Mountain West. On the other hand, states with a high cost of living have typically seen population growth lag. This is particularly true among certain Northeastern states that should have boomed, if nominal income were the best guide of how well a state is doing. Examples include Massachusetts, Connecticut and to a lesser degree, New Jersey, which has the second highest median household income in the nation.

    In sum, the cost of living says a great deal about a state, its politics and its future.

    Eamon Moynihan is the Director of the Cost of Living Project in New York. The purpose of the project is make New York City and State more competitive, with a particular focus on the costs imposed by regulation. A former government official at both the City and State level, he most recently served as Deputy Secretary of State for Public Affairs and Policy Development. An interactive website for the project can be accessed at thecostoflivingproject.org.

  • Rome Vs. Gotham

    Urban politicians have widely embraced the current concentration of power in Washington, but they may soon regret the trend they now so actively champion. The great protean tradition of American urbanism – with scores of competing economic centers – is giving way to a new Romanism, in which all power and decisions devolve down to the imperial core.

    This is big stuff, perhaps even more important than the health care debate. The consequence could be a loss of local control, weakening the ability of cities to respond to new challenges in the coming decades.

    The Obama administration’s aggressive federal regulatory agenda, combined with the recession, has accelerated this process. As urban economies around the country lose jobs and revenues, the D.C. area is not merely experiencing “green shoots” but blossoming like lilies of the field.

    To be sure, the capital region has been growing fat on the rest of America for decades, but its staggering success amid the recession is remarkable. Take unemployment: Although the district itself has relatively high rates, unemployment in Virginia and Maryland – where most government-related workers live – has remained around 7% while the nation’s rate approaches 10%.

    The reason is obvious: an explosion of government amid a decline in the private sector. Factories may be closing in Michigan, tech jobs and farms may be disappearing in California, but the people who grease the skids of the ever-expanding federal machine seem to be doing just fine.

    This is most evident at the top of the job market. The capital region now boasts the healthiest technology employment picture in the nation. Virginia has the highest proportion of tech workers in the nation. Maryland ranks fifth, and the district itself is seventh.

    The area also continues to enjoy continued growth in the lucrative professional and business service jobs category. Over the past year, according to latest estimates by www.jobbait.com, the D.C. area was the only region in the nation to enjoy growth in this field.

    Signs of Washington’s ascent abound. The local real estate market appears to be on the mend even as others suffer continued strong declines in values and rising foreclosures. Hotel prices, dropping virtually everywhere else, look to be rising as well.

    Occupancy rates, falling in most places, actually increased during the first half of 2009, as did revenues, which have taken a nosedive elsewhere. In New York prices have plunged – even the mighty Waldorf has been slashing rates.

    In many ways, the economic disasters in New York and other cities have proved a boon for Washington. Wall Street’s demise, for example, has been D.C.’s gain as the locus of financial power leaves New York for the Treasury, Fed, White House and the finance-related congressional committees. K Street is the new Wall Street, where you play for the really big stakes.

    This shift may soon spread beyond the financial sector. Want to get into the energy business? You can bypass Houston and head to the Energy Department and Environmental Protection Agency – they are the ones handing out subsidies and grants to “deserving” applicants. Thinking of expanding your city to accommodate new middle-class families? The people at the Departments of Transportation and Housing and Urban Development have their own ideas on how your cities and regions should grow.

    Manufacturing might be important to your economy, but Washington – a region with virtually no history of productive industry – generally regards factories as polluters, greenhouse gas emitters and labor exploiters. If you have enough lobbyists you might be able to hang on, but don’t really expect much in the way of positive help.

    Some “progressives” may like this model – after all, it originated in Europe, the supposed fount of all that is enlightened. Since the 18th century, Europe’s urban history has been largely dominated by great imperial centers – London, Paris, Moscow and Berlin – that treat other cities like something akin to poor relations.

    Even today European cities and localities tend to have far less control over their destiny than in the U.S. Zoning, planning decisions and even economic strategy often originate from the center, as does the power to tax and spend. For decades, Europe’s legacy of ancient urban privilege – so critical in emerging out of the dark ages – has ebbed before the increasing power of the national capitals. More recently the super-capital of Brussels, like Washington, thrives in hard times that are decimating other European urban economies.

    The great European capitals rose largely because they also served as the domicile of princes, bureaucrats and, until recent times, the clerical establishment. Other cities might have enjoyed a boom – such as Manchester during the industrial revolution – but, ultimately, hierarchy served to concentrate power in the great capital cities.

    In contrast, American cities and communities traditionally have retained control over planning, development and other critical growth factors. Equally important, American cities, noted the great sociologist E. Digby Baltzell, were not dominated by aristocracy but were “heterogeneous from top to bottom.” Urban growth came primarily not by central design but as a result of the often ruthless schemes and lofty aspirations, often ruthlessly expressed, of local political and business leaders.

    For example, the quintessential American city, New York, started as a commercial venture. As early as the mid-17th century 18 languages were spoken on Manhattan Island (population of 1,000) and numerous faiths practiced. In early New Amsterdam, the counting house, not the church or any public building, stood as the most important civic building.

    Even after the Dutch were pushed out by the more powerful British military, the bustling island city – renamed New York – retained its fundamentally commercial character. It served briefly as the nation’s capital, but its power grew from its port and its immigrants. The city’s entrepreneurial spirit and social mobility startled many Europeans. As the French consul to New York complained in 1810, “The inhabitants…have in general no mind for anything but business. New York might be described as a permanent fair in which two-thirds of the population is constantly being replaced; where huge deals are being made, almost always with fictitious capital; and where luxury has reached alarming heights.”

    This entrepreneurial pattern also drove the growth of New York’s many competitors – first the great industrial cities such as Cleveland, Chicago and Detroit and, later, West Coast metropolises like Los Angeles, the San Francisco Bay area and Seattle. More recently, there has been a similar spectacular rise of formerly obscure places like Dallas, Houston, Atlanta and Miami.

    Through much of this time Washington barely registered among the ranks of American urban centers. Despite early expectations that Washington would become “the Rome of the New World,” it lagged behind other American cities through much of the 19th century. The city was widely reviled as a fetid, swampy place with atrocious cuisine – hog and hominy grits were its staples – that offered little in the way of commerce, industry or culture. Even its great buildings were compared to “the ruins of Roman grandeur.”

    The First World War, the Depression and then the Second World War each boosted Washington’s status but hardly into the first rank of cities. Few entrepreneurs were attracted to a city dominated by regulators, clerks and lawyers. The cultural center lay in New York and Boston – and later Los Angeles. The Bay Area, Massachusetts and later Texas evolved into the primary technological centers.

    Not until the 1960s did Washington begin to emerge as something like a traditional national capital, with a large permanent population of well-educated and cultured citizens as well as a robust economy based on the defense industry and the expanding welfare state.

    But the financial crisis of 2008 has set the stage for an unprecedented growth of the region, with a Democratic president and majority seemingly determined to expand federal mandates into every crevice of community life. There is an eagerness to use federal authority in unprecedented ways that could bring federal influence into virtually every minute decision made in an urban area.

    This concentration of power is also bad news for urban economies, including New York’s. As New York University’s Mitchell Moss has observed, Gotham may be losing its perch as the true national financial center. But other cities also should take note of the trend. Polycentric sprawling cities like Los Angeles, Dallas, Houston, Phoenix and Atlanta soon may find themselves forced to reorganize themselves along lines preferred by federal urban “experts.” Hard-pressed industrial cities may find new environmental restrictions on ports and other key infrastructures an impediment to a much-needed renaissance.

    American cities are at a critical moment. Our competitive, commercial urban tradition certainly has its flaws, but it also has produced the advanced world’s most dynamic roster of modern cities and regions. Ceding the power of urban planning to Washington will cripple the American city – except, of course, for the one that reigns as locale for imperial control.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a 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 early next year.

  • Live by the Specialty, Die by the Specialty

    By Richard Reep

    Regions have a bad habit of getting into ruts. This is true of any place that focuses exclusively on one industry – with the possible exception of the federal government, which keeps expanding no matter what. This reality is most evident in places like Detroit, but it also applies to one like Orlando, whose tourist-based economy has been held up as a post-industrial model.

    This has not been helped by recent diktats from DC Central Control. As reported in the Wall Street Journal, the Ephemeral City, among others, has now been branded a Sybaris. Private interests continue to book conferences in Central Florida due to its good value, but the closed circle of federal government has prudishly proscribed the family leisure capital of the world in favor of destinations like Chicago. Central Florida’s chagrined congressional delegation, caught in reaction mode, will fight to remove this ban, but the damage has been done. A cold new era has firmly settled into the Sunshine State’s former playground.

    Since welcoming Walt Disney with open arms in 1964, Orlando proudly built its reputation as a family leisure destination. With over 116,000 hotel rooms, Orlando competes with Las Vegas in both the national and global tourism market. Indeed, Europeans, Middle Easterners, Asians, and Latin Americans make Orlando their playground, and if physical evidence is needed, the exquisitely messy honky-tonk of North International Drive testifies to this reality.

    Many couldn’t fault this strategy – at least until until now. Orlando’s mania for tourism, supported by local, regional and state policies, yielded growth beyond the wildest dreams of this once-sleepy agricultural town at a railroad crossing among orange groves and cattle ranches.

    But in the current economy, leisure can be seen as a waste of time and money. “I think Orlando got put on the list of not to go because of the perception that it is a resort and vacation area,” read a July email from a Department of Agriculture employee to an Orlando conference planner. Business in Central Florida has slowed to a trickle, anxiety is increasing and doors are closing. It seems that Orlando’s tourism bubble has popped with visitorship dropping from a high of nearly 50 million in 2005, to a projected high barely above 43 million in 2009, and while civic leaders are huffing and puffing to blow it back up again, Central Florida’s leisure industry is a shadow of its former boisterous self.

    Corporate trainers, state and local government conferences, not-for-profits, trade associations, and incentive groups still find Central Florida a decent place to hold meetings. Airfare is cheap, the vast quantity of hotel rooms makes for competitive rates. The renewed emphasis on bringing the family along makes Orlando a natural fit for many groups seeking a destination, especially in the winter. They may book rooms in more affordable Osceola County rather than pricey Orange County, but are still a few minutes’ drive from Disney’s front door, the beach, and dozens and dozens of food and shopping outlets. Some hotel owners are even contemplating new meeting rooms to keep up with shifting demand.

    The new mood in Washington, however, does not favor Orlando as a destination. Central Florida may be a good value, but this is irrelevant to the equation, for it is the overriding perception of Orlando that seems to worry our national government’s travel planners. And this perception tells us quite a bit about the real thinking that is happening at the federal level.

    If the new policy were to plan trips only to destinations under the median cost, it would send a message that government does not want to waste money. It might also send federal conferences to destinations in overlooked parts of America that could open beltway eyes to the bleak turmoil enveloping so much of the country, despite the steady drumbeat of recovery news.

    Meanwhile, sellers already know that Washington is really the only game in town, as businesses turn towards grant programs, rebates, and other incentives to backfill lost private sector revenue in goods and services. But if one looks closely at the actual investment pattern, Washington seems to favor the financial market, green energy, and possibly its own future health care program – none of which plays to Orlando’s strengths. This extremely narrow set of interests belies a harsh ideology, as harsh as the ideology it replaced, and as bad for the average citizens of America.

    Yet for all this, Central Florida should share some of the blame. Orlando cursed itself by growing around a single specialty, rather than a diverse set of interests. Favoring theme parks over agriculture was certainly an opportunistic decision, but reinforcing tourism and ignoring all other investment has proved a vast miscalculation. The Sunshine State could have been #1 in solar energy research by now, making it Obama’s darling. So Central Florida, without any other true industry, now grovels at the government’s feet to restore itself into good graces and allow a National Park Service meeting to take place at the Ramada Inn again. It is likely that Orlando will be shut out of this closed circle for some time to come.

    Central Florida’s best hope lies in a recovery of the private sector economy, a regained sense of profitability by corporations, and a renewed faith in the future by individuals. Lacking these now, Central Florida hibernates, its giant engines of escapism in low gear, mothballed, or abandoned.

    One almost hopes The Recovery will be delayed long enough to suffer some sense into the politicians and business leaders who can diversify the economy of the region. After all many of things that attract tourists – low costs, good infrastructure, warm weather – should also lure entrepreneurs, skilled workers and capital, foreign and domestic. You wonder why our leaders have not yet thought of this, or put a plan to diversify into action.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo by Carlos Cruz.

  • Do Home Energy Credits Need A Remodel?

    With the home building industry in peril, you would think that legislators would come up with immediate solutions to help foster new home construction. And there are now two well known Federal programs regarding housing: one is the $8,000 tax credit for first time home buyers, and the other is the 30% energy tax credit for a select few components of home remodeling.

    The $8,000 credit for first time home buyers is a good idea, and seems to have helped at least a few buyers purchase homes. Of course, it’ s not clear how many purchased bargains on previously owned homes and how many actually purchased new homes.

    The 30% energy tax credits are a different matter. I’m against the current incarnation of the program for a host of reasons:

    Problem No. 1: The 30% tax credit applies to only a few select items that somehow qualified, and there’s no (simple) way to get on the approved list. In addition, Energy Star certification assures that the “product” has gone through some scrutiny on performance and reliability. But what of the equally important installers?

    Problem No. 2: New construction gets very limited tax credits. When retrofitting existing houses, tax credits apply to the installation of efficient windows and insulation. But new construction (along with remodels) is not eligible unless it includes Geothermal, Solar Hot Water, or Solar Electricity. These benefits are meaningful only to those with enough income to make a credit of this size enticing. The middle and upper class homeowners who are willing to finance these upgrades hope that the after-tax benefits will make the investment worthwhile.

    In theory, of course, the ticky-tacky downtrodden neighborhoods built after World War II can also be upgraded…to become energy efficient ticky-tacky downtrodden neighborhoods. But the energy credit will not benefit those that need it the most: those in the lower income strata that find it difficult to survive from pay check to pay check. A 30% tax credit does them no good at all. Even if the tax credit made sense for downtrodden neighborhoods, none of the older homes would ever become nearly as energy efficient as new construction.

    As an example, let’s say 50 homes in a low income neighborhood did take advantage of the tax credits and upgraded their windows and insulation, and added geothermal design because that was the only option approved for the benefits. This would easily add up to well over $50,000 per home – at least $2,500,000 – of which almost a million dollars is funded by you, the tax payer.

    As an alternative, the 50 houses could be leveled, and excess streets abandoned to create a large developable contiguous tract of land. New home builders on the verge of bankruptcy, and even corporate national builders, could easily reinvent their business to build new urban neighborhoods using more efficient development patterns. To upgrade a new affordable home with more energy efficient windows would cost $2,000, an inch of foam insulation added to exterior walls would be another $2,000, and a high efficiency heating and cooling design just another $2,000. This highly efficient new home would use a fraction of the energy of an upgraded old home, and would add only $300,000 for all 50 homes. New neighborhoods could also have a fraction of the environmental impact of older ones, if planned using newer techniques. Low income families can live in new green neighborhoods, and the home building industry can find a new market while curbing sprawl at the same time…

    Any politicians reading this? (see study).

    Problem No. 3: The current tax credits promote overkill. Almost all the recent Green Certified Homes sold in the Minneapolis area had geothermal design as part of their package. Certainly a home builder increases profits by including a complex geothermal system instead of a simple, highly efficient and low cost conventional heating and cooling system. Building a new, well insulated home results in a significant reduction of heating and cooling energy needs, and the upgrade to a highly efficient system on a new home costs as little as $3,000 extra. But if the home design is not geothermal it will not get tax credits. A passive solar designed home gets free heat on sunny days — also not eligible for tax credits — but a $50,000 geothermal system is.

    Problem No. 4: The current tax credits are creating a false economy for the very few businesses that manufacture approved items. Without the tax credits, these suppliers and manufacturers would need to come in at a reasonable price point/payback ratio to generate the volume of sales necessary to be profitable. In other words, they would have to invent, innovate, and deliver systems that make sense or fail in the marketplace. As soon as the tax credit ends many will not survive. An article on energy tax programs of the 1980s and the “tin men” that sold under-performing systems shows how 95% of the manufacturers of that era went out of business when the Carter era tax benefits ended. What happens to the warranty and guarantees when the company is no longer around?

    So what’s the solution to the problems? Either fix the tax credit program, or do away with it.

    Make the program flexible enough so that new innovations can be accommodated, and make the system itself easy to access. This would encourage companies to be competitive, and give hope to start-ups that cannot right now get financing. The current application system favors well-funded, big corporations, and is far too restrictive in its scope. Have the tax credit apply to window and insulation upgrades above the “standard for code”, and include all heating and cooling systems that are above the 90% efficiency typically included in new construction. Even a tax credit limited to the price difference created by the upgrade would jump start both the green industry and new home construction.

    And while we’re jumpstarting…let’s not forget a little history. During the dot-com crash earlier this decade, unscrupulous promoters bilked investors out of billions of dollars on false promises. These promoters did not disappear, they simply moved to the next opportunity: mortgage and real estate. Quick profits from flipping real estate created an economy that was un-policed and unsustainable. Let’s not permit energy upgrades supported with a 30% tax credit to become the next unsustainable wave.

    Rick Harrison is President of Rick Harrison Site Design Studio and author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable. His website is rhsdplanning.com.