New Geography

Category: Policy

  • Bringing Hope to Red America

    In the end Appalachia remained out of sync with much of America this year. West Virginia, Kentucky, Tennessee and much of the hill country went for John McCain. Senator’s Obama’s message of “hope” did not play as well here as elsewhere.

    This may seem a bit odd. The major targets of the election were Joe six-pack, Joe the plumber; Joe the ordinary man. Joe represented the disaffected males, the lost ones yearning for a simpler time and a better time. Enough Joes in other states voted for Obama to get him a spectacular victory in places like Ohio, Florida and Michigan.

    But no one thought much of Joe the coal miner and not much thought has been given to what this election means to the many “Joes” who live in Appalachia. For too many generations, our Joes have either hunkered down and worked the coalfields, or eked out a meager living on rocky hillside terrain. Many survive on the cash economy, tinkering as best they could to put together a living. My father tells me his grandfather made mandolins to supplement his farm earnings and played them at family gatherings. He describes his upbringing as poor, but happy.

    There were town centers where, as my dad put it, families would come to “trade” on the weekends. Baseball teams formed and played in the circuit of small towns. I once saw a 1914 picture of my grandfather as a member of one of those teams – called the Mize Nine. Today you could not get nine people together in Mize, now barely a wide place in the road.

    It is a world where the much discussed disappearance of the middle class didn’t apply because it never existed. Like my father, many of them left for the factories of the north in the 40s and 50s. The culture was and is a story of unparalleled literary and artistic musical strength, but little in the way of jobs outside of coal.

    Appalachian people were sometimes portrayed during the primary as racist, ignorant and pathetic. Appalachian towns like Inez, Kentucky – the site of LBJ’s proclamation of the war on poverty in 1964 – were visited and heralded as the towns to be rescued – only to once again be left behind.

    In an era of demand for change, what can be expected of or for Appalachia? It is a land where minerals are king and largely owned by outside interests. It has resisted change and remains ridden with poverty and an image that defies change even in the face of success – and there are some success stories in Appalachia.

    Barack Obama is the candidate known for his message of hope. He is known for his soaring speeches that lift us up. But, he is a Chicago kind of guy and seems to grasp the need to pay attention to the big cities and surrounding regions where 75 percent of Americans will likely live in the year 2050.

    But, “hope” also applies to places like Appalachia. We don’t need to be caricatured in the national media as pathetic, poor and somehow outside the brave new world.

    Yet we should not expect that help will come from Washington and solve the problem. It is dawning on all of us that what is big and glittery may not be what we seek. The environmental, energy and fiscal crises have converged to drive home what Katrina only began – the need for a realignment of our priorities.

    Those priorities are not fundamentally about big new investments in infrastructure or Washington support for improved education. Those would be welcome, but the change that will work long-term comes from the local level, from the ability of smaller places to reinvent themselves.

    I see some signs of this. Places that were left behind or written off are coming alive once recalling the early days of the Mize Nine as we seek to build locally what is beyond our scale in those more glamorous venues.

    Being “left behind” is something that implies that others must reach out and provide the rescue. In Inez, the people are speaking and they are saying we will take control of our own destiny. We want to write a new story that transcends poverty and the painting of images by the 24 hour news outlets. Perhaps, instead of trying to catch-up, these places can leap forward to lead the way toward local prosperity and a better quality of life. Will we in Appalachia now finally make the intentional choices to secure a better future or will we continue to let others tell our story of woe and misery?

    The truth is that the story won’t change if we don’t begin to write and tell our own stories. As the new administration grapples with the many issues it faces – health care, energy and fiscal distress to name just a few – it should remember the words of Colin Powell: “All villages matter.” Small places – and big ones – do not need Washington to save them, just to acknowledge that they are important and deserving in their own way.

    So, as President-elect Obama looks to the future, he should grasp the opportunity that is upon us to build great communities in all corners of the nation under the new rules of the game of the 21st century. Appalachia may not have voted with him, but we are still part of his constituency; “red” America, as he suggested last night, is still part of his America.

    Our new President needs to realize – as do we – that the tired old policies of Washington will not work any longer – “handouts” have never been the answer. And, as one voter here said: “We intend to hold Obama accountable in his presidency.” She paused before adding: “And, we expect him to hold us accountable as well.”

    Sylvia L. Lovely is the Executive Director/CEO of the Kentucky League of Cities and the founder and president of the NewCities Institute. Please send your comments to slovely@klc.org and visit her blog at sylvia.newcities.org.

  • The Entrepreneur is the True Face of Capitalism in America

    “Joe the Plumber” has gotten a lot of media attention over the past week. Depending on which side of the political fence you’re on, he is either a phony who is not even a registered plumber or a symbol for the unintended consequences of wealth redistribution policies. A Rasmussen survey taken on October 19th showed “Sixty-nine percent (69%) of Democrats think [Obama] is right on [spreading the wealth], but 78% of Republicans disagree.”

    It is easy to rail against corporations like Exxon-Mobil while surging gas prices force average Americans to make tough choices with the family budget. In 2007, they reported $39.5 billion in profits which represented 11.4 percent of revenues – up 9.3 percent over 2005.

    Not surprisingly, building popular support to tax windfall profits is easy politically. So, too, is the idea that these taxes should be redistributed to working families. On the other hand, making the case that profits will spur new energy development and reward shareholders seems almost impossible.

    CEO pay, and especially bonuses, are also easy targets for populists. In 2007, major financial firms in New York paid $39 billion in bonuses to themselves. Overall, CEO bonuses increased 27.1 percent in 2006 according to Business Week. The public has trouble understanding how the CEO at Lehman Brothers can make almost $450 million since 2000 and provide millions of dollars in “golden parachutes” to executives even as the firm was failing.

    But the media and the electorate often miss a key distinction. CEOs are not entrepreneurs. They are high paid managers who run the companies that true entrepreneurs built generations ago. Many are graduates of elite business schools who have extensive networks of contacts in business, government and among the “movers and shakers” of our nation. Quite a few are from the nation’s wealthiest families.

    On the other hand, “Joe the Plumber” is a symbol of entrepreneurism – the “little guys” with big dreams. They want to be their own boss. They feed off the soft underbellies of corporations too big or too inflexible to react to changes that create opportunities. Most are hard-working and honest. They don’t have stock options, bonuses or golden parachutes at retirement. In fact, most have many payless paydays when building their businesses.

    Entrepreneurs are America’s job creators. According to the Small Business Administration, from 2003 to 2004 companies with less than 20 employees created roughly 1.6 million net new jobs. Companies with 20 to 499 employees created around 275,000 net new jobs. Meanwhile, employment at companies with more than 500 employees shrank by 214,000.

    The University of Michigan and Florida International University study entrepreneurial activity in America. The metric they use is the number of people who start new businesses or manage firms less than four years old. In 2005, they reported that 23 million people were in this category. Some of the demographics of this group are interesting:

    • 18- to 34-year-olds account for about 44 percent of new firm creations.
    • 57 percent of those starting a new business have high school education.
    • Only 23 percent have finished college.

    Entrepreneurs are the risk-takers in America who know that they are bucking long odds in pursuing their dream. In his book Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By, Professor Scott Shane compiled data tabulated by the Bureau of the Census produced for the Office of Advocacy of the U.S. Small Business Administration and found that only 29 percent of business ventures that were started in 1992 where still around in 2002.

    The entrepreneur is the embodiment of the American spirit and validation of the American dream. Bill Gates epitomized this in the last few decades. He is now using his tremendous wealth for good by funding education and world health programs. On the foundation’s website, Gates lists 15 principals about the role of philanthropy. Principal #7 reflects Gates’s entrepreneurial roots: “We take risks, make big bets, and move with urgency. We are in it for the long haul.”

    The legacy of entrepreneurism can be seen in university buildings, hospital wings, libraries, research centers, foundations and companies that bear the names of entrepreneurs. Most started with a vision to do something new or make something better or more efficiently than ever before. Sadly, many of these institutions, particularly universities and non-profit foundations, seem committed not to fostering more entrepreneurs, but rather to teaching that capitalism is inherently unfair.

    When candidates rail against CEOs and corporate greed they need to be careful that their anger and the populist policies that grow out of it do not spill over into entrepreneurism and extinguish its flame.

    Let’s punish those whose greed for short-term profits has nearly destroyed our economy whether or not they are on Wall Street or in a corporate suite. But we must keep in mind that if we let our anger spill over to extreme new regulation and a new regime of higher taxes, we will also be targeting those “little guys and gals” who want to chart their own course to success. America needs its entrepreneurs perhaps now more than ever before in our history.

    Dennis M. Powell is president and CEO of Massey Powell an issues management consulting company located in Plymouth Meeting, PA.

  • The biggest issue remains undecided

    Unless something completely unexpected occurs, the presidential election has been settled, with Barack Obama the clear winner. Yet, except for the Republican Party’s demise, the most important issue of this era — the future of the middle class — remains largely unaddressed.

    Indeed, even as social polarization has diminished — a change that is reflected in Obama’s electoral success — economic polarization has intensified. Globalization and the securitization of almost everything have created arguably the greatest concentration of wealth since before the Great Depression.

    During much of the 20th century, the middle class was on a roll, with strong income gains and increasing rates of homeownership. But in the past few decades, while returns to capital and to certain elite occupations grew rapidly, wages for lower-income and middle-class workers have stagnated.

    To date, neither Obama nor John McCain has articulated a clear message of how to restore the path to upward mobility. Recent proposals from both candidates have been distinctly ad hoc and have had a short-term orientation — not surprising, given the severity of the crisis and the brief period left before the election.

    Yet over time, how the next president, presumably Obama, addresses the problems of middle-class Americans will determine the future of American politics. The party that captures the loyalty of that class — as Republicans did in the early 20th century; Democrats, from the 1930s to the 1960s; and Republicans, again after that — will dominate the nation’s politics in the coming decade.

    The political future may lie with a party that embraces a growth-oriented economic strategy that focuses on the creation of higher-income productive jobs for both younger and older workers. But it’s far from clear that the Democrats under Obama are ready to play that role.

    Clearly, these are not the Democrats of Franklin D. Roosevelt’s New Deal, Harry Truman’s Fair Deal or even Lyndon Johnson’s Great Society. Working- and middle-class Americans, including small farmers, low-level proprietors and ethnic businessmen, constituted the primary base for those Democrats. Although some leading Democrats, notably Roosevelt himself, came from the aristocracy, the upper classes and most of the corporate hierarchy remained fiercely Republican.

    But now the old class lines have changed. The once-impregnable visual barriers of the past — which separated the ultrarich from the rest of us — have largely dissolved. As Irving Kristol once noted, “Who doesn’t wear blue jeans these days?” Today, you can walk into a film studio, software corporation or high-tech firm and have trouble distinguishing the upper tiers from at least the middle ranks.

    Many of these moguls today tend to be socially and environmentally liberal and strong supporters of the Democratic Party. Yet despite their attire and attendance at U2 concerts, their economic concerns will remain radically different from the rest of society. Having secured their support, a President Obama may be forced to take great pains to secure the fortunes of the likes of George Soros, Robert Rubin, the Google decabillionaires and other big party funders.

    We may have witnessed the birth of this new class in the bizarre alliance of Nancy Pelosi, Harry Reid and Barney Frank with Wall Street’s viceroy, Treasury Secretary Henry Paulson. Once fully in power, these Democrats likely will begin by propping up the financial elites — much as Bush has done — but will also have to make a “grand bargain” to satisfy key party constituencies outside of the financial elite.

    There are already hints of this in Obama’s recent statements. His program to send cash to the poor through tax credits and other largesse can be seen as a political payout to his large, heavily minority, urban constituency. Massive bailouts for failing city, state and county governments — another part of the senator’s program — would also bolster public employee unions and their pension funds, both of which have emerged as key Democratic backers. New handouts for the U.S.-based auto industry, as Obama has recently suggested, would, not coincidentally, help one of the last large, unionized private sectors.

    Sadly, none of this will do more to create upward mobility, particularly for the next generation. The working poor may get a few hundred desperately needed dollars to spend, but this is no substitute for a policy that would stimulate production of jobs. Unions and their pension funds would get an extended holiday from addressing their often outrageously generous retirement and medical benefits, but that comes at the expense of the larger, private work force. The financial elites could secure government support for stabilized markets but would have little incentive to invest in domestic production industries and middle-class employment.

    Finally, Obama’s base of highly educated, socially liberal, professional Democrats — largely insulated in universities and nonprofits from economic distress — would be rewarded with the political validation of their worldviews on everything from gay marriage and diversity to environmentalism. More federal support for education, another likely Obama initiative, could also allow them to keep comfortably feathering their nests.

    Over time, however, such an approach could threaten the unity of the Democratic Party. This prospect emerged in the first House vote on the initial Wall Street bailout package. In addition to economic fundamentalist Republicans, many suburban, exurban and rural Democrats also found the plan objectionable. Hostility was particularly marked in the Great Plains, Appalachia, South Texas and other areas strongly oriented toward energy production, manufacturing and logistics.

    This growing wing of populist Democrats, often more socially conservative than their coastal and urban counterparts, tend to favor steering capital toward sectors such as domestic energy production, agriculture, manufactured goods and domestically sourced specialized services. All these, they believe, could drive up incomes and salaries for a wide spectrum of Americans far better than boosting transfer payments or shoring up investment banks.

    This political approach does not appeal to the urban liberals now dominant in both the Democratic Congress and the Obama camp. These represent places, such as New York, San Francisco and Chicago, that are increasingly more dependent on speculative real estate and financial assets than producing goods. Their primary interest in the next few years will be to find out how to create yet another bubble, perhaps tied to designated “green” industries, which could send local land values and stocks soaring again to unsustainable heights.

    All this, however, leaves the Democrats and Obama in a quandary. They could favor programs to expand industry, energy production and basic infrastructure, but they would risk of a wrathful Gore and his allies. It will take all Obama’s considerable political skill to balance his commitments to the greens, the hedge fund industry and venture capitalists with creating a program that will increase the incomes and prospects for middle-class Americans.

    Republicans could take advantage of this schism — if they have the intelligence and foresight to do so. The GOP could embrace the old Hamiltonian policy of internal improvements and incentives for the country’s industrial, energy and logistics companies that still employ millions of working- and middle-class Americans.

    After all, the legacy of corporate socialism bequeathed by President Bush makes it almost impossible for Republicans to sell themselves as economic libertarians. They will need to offer something to the middle class besides the well-worn politics of social resentment and military belligerence.

    But such a GOP rebirth likely lies in the future, if ever. In the next few years, the Democrats will have to address the nation’s growing class chasm on their own. How they do this may well determine not only the future success of the Obama presidency, but the survival of the American aspirational model, as well.

    This article originally appeared at Politico.

    Joel Kotkin is a presidential fellow at Chapman University and executive editor of www.newgeography.com. He is finishing a book on the American future.

  • Neither fish nor fowl: Emerging urban enclaves in inner-ring suburbia

    By Peter Smirniotopoulos

    As I was walking my dog the other morning I was struck by the fact that the City of Falls Church, Virginia, the quaintly bucolic suburban “village” to which our family moved in mid-2001, was no longer suburban. It isn’t a city in the proper sense, like Washington, DC or even Alexandria, Virginia, but it is reflective of the trend towards quasi-urban places in the close-in rings – the original turn-of-the-century and pre-Levittown suburbs – enveloping our city cores.

    The City of Falls Church was formed around the middle of the last century by a group of secessionists residing in what was then a sliver of Fairfax County along the Arlington County border. The candy coated version of the city’s history holds that these secessionists were seeking to create a better school system for their children; the more cynical view is that they were creating a segregated, white school system. Whichever version of the truth you prefer, the Falls Church City Public Schools subsequently became the first public school system in the Commonwealth of Virginia to adopt the International Baccalaureate (I.B.) curriculum. In 2001, the city’s George Mason High School ranked #5 among the country’s most-challenging high schools, eventually reaching #2.

    Like many other metro areas, the geographic pattern of regional growth in the Washington metro area has been driven in by the successes of its suburban public school systems, with the Fairfax County and Montgomery County, Maryland, school districts being the most notable. A metro Atlanta county executive explained this phenomenon thusly: “People don’t want to live where they can’t educate their kids,” rationalizing why his county, with a well-respected public school system, was growing and thriving while the neighboring county, with a somewhat derided public school system, was not.

    So homebuyers have flocked to the City of Falls Church and its nationally ranked high school, putting sufficient pressure on home prices (primarily single-family detached homes on modest-sized yet verdant lots) to raise the median price precipitously. The high school certainly was a primary motivation for our move from Del Ray.

    Yet when we left our Del Ray neighborhood in Alexandria we also wanted to replicate – to the greatest extent possible – our community’s walkability and mixed-use character. Yet these fundamental attributes were not as pronounced in the City of Falls Church, in part because it is bisected by two major arterials: Va. Route 7 (cleverly named “Broad Street,” being four lanes wide), an east-west connector; and Washington Street, also known as Lee Highway or Rte 29, a north-south connector (also four-lanes wide but the name “Broad Street” had apparently already been taken).

    When we arrived in the city the stretch of Route 7 that extends west from this major intersection was characterized primarily by low-scale (i.e. one and two-story) retail and commercial buildings. The predominant commercial building typology along one stretch of Route 7 was one-and-a-half story single-family residential structures fronted by surface parking adapted for commercial uses (palm reading, anyone?), reflecting neither good urban nor suburban values.

    And yet since 2001 things began to change for the better. Local elected leaders had an epiphany that a city of two-square miles is not sustainable. Relying almost exclusively on property tax revenues from single-family detached homes simply does not generate enough money to cover the expenses they generate. The success of similar suburban-to-urban transformations in nearby Arlington County along the Metro line – like Clarendon and Ballston – was both instructive and politically comforting. City leaders and staff began to embrace the concept of denser mixed-use development, although not without taking some political heat from those insisting that their suburban village be protected and preserved.

    Today, Route 7 benefits from four, very urban mixed-use buildings – ranging in height from four to eight stories – adding dramatically to the diversity of the city’s housing stock, helping to diversify the city’s tax base, and putting boots (or at least pumps and loafers) on the street. These new buildings also provide a much better focus for the city’s “Main Street” than the single-story structures they replaced, with the new building heights and strong street walls better modulating the width and traffic flow on Route 7. A fifth new building is currently under construction and a hotel has also been approved.

    In addition, two new, mid-rise, mixed-use projects now anchor either end of Lee Highway, and an ambitious City Center project may finally become a reality, potentially trumping the visual cacophony of the nearby Route 7/Lee Highway intersection (an excellent example of bad urban forms meet typical low-rise, suburban development). Moreover, the attendant broadening of the tax base will eventually insulate the city’s fortunes from the ebbs-and-flows of either the commercial or the residential real estate markets.

    As a result, in terms of physical form and character the City of Falls Church is now much closer to “urban” than “suburban.” As ground floor retail spaces fill in and mid-rise residential units become fully occupied, that evolution from suburban to urban will become more pronounced. Residents in the single-family detached homes and newly minted McMansions lining the neighborhood streets on both sides of Route 7 also will benefit from having many more things to see and do within walking distance of their homes.

    The small-town origins of the city can still play out in somewhat nostalgic events like the Annual Memorial Day Parade (and who doesn’t love to see Shriners in their fezzes and tiny race cars). Neighbors will continue their weekly chats at the Saturday morning Farmers’ Market at City Hall. However, the train has clearly left the station on the question of whether the City of Falls Church is still a classic suburb: The only question remaining may be “What the heck do we call this thing?”

    Do any of you have a good idea?

    Peter Smirniotopoulos, Vice President – Development of UniDev, LLC, is based in the company’s headquarters in Bethesda, Maryland, and works throughout the U.S. He is on the faculty of the Masters in Science in Real Estate program at Johns Hopkins University. The views expressed herein are solely his own.

  • Resources and Resourcefulness – Welcome to The Real Economy

    By Delore Zimmerman

    The orchard-laden foothills of North Central Washington’s Wenatchee Valley are resplendent at this time of year. The apple and pear harvest is in full swing. The warm golden hues, the crisp mountain air and the bustle of trucks carrying produce to markets near and far provide a stark and welcome contrast to the daily barrage of bad news about the downward spiral of the nation’s financial markets.

    In places like New York, Chicago and San Francisco we can see the result of the demise of once-vaunted vapor traders. They created nothing but debts and are leaving whole economies in shambles.

    But in the Wenatchee Valley one can clearly see the fruits – both tangible and figurative – of the real economy. Over the course of almost ten years a determined coalition of community and business leaders has been working hard and working together to build an economy of substance and promise. The results of their efforts include a picturesque and vital downtown, a thriving and growing fruit and wine industry, a riverfront soon to be animated with housing and community recreation facilities, and a Yahoo data service center.

    These diverse elements make for an economy whose benefits are substantial and meaningful for the people of that region. The City of Wenatchee and the Port of Chelan County are the driving forces behind these initiatives. But the Wenatchee Valley’s success also can be traced directly to the investments and commitment of numerous private and government partners from within the region and from the outside. The Chelan County Public Utility District, for example, operates three hydro projects that deliver clean, renewable, low-cost energy to local residents and to other utilities that serve 7 million residents of the Pacific Northwest. The PUD operates a utility system that now includes local water, wastewater and wholesale fiber-optic services in addition to electricity.

    To capitalize further on its hydro power resources leaders in the Valley are aggressively pursuing an Advanced Vehicle Innovations (AVI) initiative. The AVI Consortium was conceived by the Port of Chelan County in 2005 to establish North Central Washington as a catalyst and center for development, demonstration, and deployment of flex-fuel plug-in hybrid electric vehicles. These are vehicles propelled by a combination of electricity-from-the-grid and bio-fuels (i.e., bio-diesel, ethanol). Both of these energy resources are in plentiful supply in the region.

    So here’s a lesson for our nation’s next stab at building a prosperous national economy. Put the money in the hands of those who can harness local and regional resources and make something useful out of them. It can be fruit, a manufactured product, or a service like data processing. The result is a community that, although not immune to the Wall Street tsunami, retains tangible assets that will survive the current storm.

    This real economy is working right now in the Wenatchee Valley. It also exists in many other communities and regions throughout the nation, from the Dakota plains to the energy corridor around Houston, and the growing industrial districts of the Southeast. These places represent the bright face of America’s future economy. If only they were taken more seriously by those – our nation’s leaders and so-called financial wizards – who are now driving us towards an era of darker expectations.

    Delore Zimmerman is President of Praxis Strategy Group and Publisher of NewGeography.com

  • Here They Go Again

    Recent soundings from Washington suggest that neither party has a solid idea of what to do about the deepening economic crisis. It makes me cringe to hear Barney Frank, Chairman of House Financial Services Committee, talking about a big stimulus to “prop up consumption”.

    Under the Democratic-controlled Congress, this would likely include the usual tax relief to middle and working class Americans, as well as big new payments to hard-pressed cities and states. To be sure, the interests of wage-earning Americans should be paramount, but this is reminiscent of the “stimulus” plan earlier this year that did little more than “prop up” spending on consumer goods for a couple months.

    Since many of these products are made in China or somewhere overseas, who are we helping most here? In addition, of course, the bail out of local governments benefits a prime Democratic constituency — public employee union. If we are going to cough up more to pay their salaries, why not ask them first to accept less largesse? Maybe they can agree not to retire until they are in their sixties, like the rest of us chumps, I mean, taxpayers. Then we can talk bailout.

    However, let’s not pick on Democrats alone. The Republicans seem to like consumer “stimulus” but only when spiked with more tax cuts for their dwindling, but still significant cadre of wealthy Americans. Maybe this will help consumption a bit more at Bloomingdales than Wal-mart, but in the end, who cares?

    My thought is that we should focus instead on the core issues of stimulating the “real economy” through incentives for high value manufacturing, domestic energy producers of all kinds (including nuclear power) and investment in basic infrastructure, including new transmission lines, research in clean and alternative fuels. All of these things would reduce our increasingly debilitating dependence on other countries to fund our deficits and consumption habits.

    To lift spirits of Americans the most we need a program that aims to make the country less dependent on both Middle East energy producers and Chinese manufacturers. As we did starting in the 1930s, let us create a climate for real upward mobility based on expanding the productive economy. It’s time to stop relying on quick sugar highs to spur more consumption of items we do not produce or can’t afford and time to start getting back to basics.

  • The Financial Crisis: Bubbles Deflating Worldwide

    The mortgage meltdown is much more than an American affair. Real estate bubbles have developed in all major English speaking countries – US, Canada, UK, Ireland, Australia and New Zealand.

    Over the past year, house prices have dropped 12 percent in the United Kingdom. The annual decline is approaching 10 percent in Ireland, while median house prices have dropped six percent in New Zealand. In each of these countries, the price declines started after the United States. Further, each of these nations has experienced massive nationwide housing inflation, in part, I believe, as a result of highly restrictive land use policies. These policies, often known as ‘smart growth’ have made it virtually impossible to build new housing on the fringe of urban areas inexpensively.

    Where prices will finally settle, no one knows. Some analysts soothe the market claiming that the bottom is near. But many, including The International Monetary Fund, predict the worst of the mortgage crisis is yet to come in the United States. Similarly, former chairman of the council of economic advisors, Martin Feldstein suggested last week that prices would fall to their pre-bubble levels, as did I in this space as well. That’s what bursting bubbles is all about – prices that drop to pre-bubble levels.

    Canada is another story. Like the United States, housing costs remain within historic norms where there is traditional land use regulation, while restrictive land use regulation has led to a housing bubble in some markets. This is especially true in Vancouver, where there has been some minor price softening in recent months. Bank of Nova Scotia officials have indicated that they do not expect the kind of bubble bursting in overpriced Canadian markets that has occurred in the United States, at least partially because there was a lower volume of profligate lending (subprime, etc.) in Canada.

    Janet Albrechtsen, a columnist for The Australian writes in The Wall Street Journal that the Australian financial system also is healthier than America’s, at least in part because of more stringent mortgage regulation. If her analysis is right, Australia could be spared the mortgage meltdown that is engulfing America, the United Kingdom, Ireland and New Zealand. Thus, far, there is little indication of declining house prices in Australia.

    That does not mean there is no bubble. Even with strong banks, Australia has a problem. A housing bubble as pervasive as the United Kingdom has developed in Australia, despite its wiser financial regulation, House prices have risen to from two to three times the historic Median Multiple (median house price divided by median household income) norm of 3.0.

    The Australian bubble, like in the United Kingdom, Ireland and New Zealand (as well as parts of the US) has been spurred by overly restrictive land use regulation, which forces land prices up and causes them to explode even with moderate increases in demand. In response, the Median Multiple has increased to more than double the historic norm in all major capital cities. As a result, younger and future Australians have to pay far more of their income for housing than those who came before. So, while superior regulation may have kept Australia’s banks healthy, the prospects of many younger members of society have been greatly diminished. They will have been the victims of the largest inter-generational transfer of wealth in the nation’s history.

    Despite Ms. Albrechtsen’s optimism, it is not yet clear that Australia’s bubble will not eventually burst. Certainly falling commodity prices could hurt the employment situation, particularly for middle and working class Australians who are now struggling to pay ever higher percentages of their incomes for housing. Australia may have remained ‘the lucky country’ so far in terms of real estate. But whether that will persist in the coming months is still open to question.

    Note 1: http://www.demographia.com/dhi.pdf.

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

  • Florida: The Music Has Stopped

    And those without chairs will be standing for an awfully long time

    By Richard Reep

    Florida real estate, which boasts a notorious tradition that dates back to Ponce de Leon’s search for the Fountain of Youth in 1513, has recently exceeded even its own flaky reputation. Quality of life here will suffer in the near term. In the long term, Florida’s economy will recover its viability, but in a new form.

    The immediate future will be difficult. By referendum, Florida enacted multiple property tax cuts in a state already known for low taxes. Now, with declining property values, the state legislature has drastically less money to spend on infrastructure, services, and capital improvements. Business, mostly tourism and land development, suffers from the economic turmoil. But it is the nonprofits who probably struggle the most. Floridians, known as the least generous donors to nonprofits, have now even less to donate, causing more holes in the safety net, reduced care for the needy, and reduced funding for the arts. It’s going to be a tougher state, particularly for the poor.

    Consider the Gulf coast town of Sarasota. Once known for its high-net-worth retirees, Sarasota diversified and prospered in the 1980s and 90s. Sarasota sported world-class public art along the waterfront, terrific galleries, and an affinity for contemporary architecture rare in the Southeast. Downtown was surrounded by a necklace of authentic, unique neighborhoods ranging from the Ringling School of Art in the north to Towles Court in the south. Sarasota County also boasted a mix of marine/industrial, agricultural, and tourism economies.

    Little of this has been sustainable in the current boom/bust cycle. Florida’s growth management dictates that each county submit a Comprehensive Plan for development. Once submitted, this Plan may be amended by the county Planning Commission if a landowner has sufficient cause to challenge it. Sarasota County’s Comprehensive Plan historically focused on coastal development. The pressure to add massive tracts of subdivisions, however, amended the Plan multiple times, diluting this concentration and allowing eastern inland regions of agricultural land to be rezoned for single-family houses. “It’s as if a company’s business plan could be changed at will by any employee of the company”, commented one county staff member recently, “making this Plan totally meaningless.” Sarasota threw away its own special sense of place, to its own detriment.

    As a result, the cultural life of Sarasota has perceptibly declined. Art galleries are closed, the public art venue is vacant, and waterfront redevelopment has stalled. In an effort to chase high-tech jobs, the county ignored the needs of a major local employer, causing the employer to relocate thousands of jobs out of the county. No high-tech companies were recruited in the process. Sarasota will need a great effort to pull out of this dive.

    Orlando, in the northern center of the peninsula of Florida, is a quintessential Ephemeral City, supporting private, world-class family entertainment. Orlando has suffered from similar issues as Sarasota, but somewhat less dramatically. Unlike Sarasota, Orlando can expand in all directions and has earnestly done so, encompassing three counties and two million people.

    Orlando seems to live in Disney’s bright shadow. Getting to know the older, denser parts of Orlando in more detail takes time. This mostly-ignored area offers an authentic and beautiful place that is relatively livable in terms of affordability, access, and social life.
    When the music was playing, downtown politicians were giving tax incentives to unique arts-oriented businesses that moved downtown. Today, they offer similar tax breaks to big box retail. Like downtowns of many primary and secondary cities, Orlando has sprouted multiple – mostly empty – condominium towers, but the city escaped the egregious situation of Miami (20+ empty towers). Nearly all surrounding communities have emulated this condition, with even sleepy Sanford (population 39,000) displaying an empty downtown condominium.

    Spreading out from downtown Orlando are older suburbs – including College Park, Thornton Park, and Old Winter Park – where marvelous pockets of sustainable mixed-use streets are interlaced with lakes and diverse residential neighborhoods. The saddest counterpoint to these jewels is the half-brownfield efforts of developers from Texas, North Carolina, and Atlanta. Large tracts of older building stock in these neighborhoods have been bought and scraped clean, with billboards advertising bland, residential-over-retail “town centers.” Without residential buyers, these projects have stalled, leaving empty wastelands of sand poignantly anchored by lonely sales trailers likely to remain dormant for years.

    Central Florida is also the breeding ground of garish New Urbanism developments, most notably Celebration and its facsimiles. These form-obsessed developments issue patternbooks for architecture, hoping that front porch control will instill community values and social order among those able to afford their mortgages and community association dues. Planners of these neighborhoods seem to find the industrial-era “streetcar suburb” to be the best America has had to offer. Every advance or innovation since then is regarded as too ‘modern’.

    At the same time, the social dimension of New Urbanist development has been very disappointing. Promoted in its early phase as a way to integrate multiple income levels into one community, New Urbanism is instead an excuse to ratchet up home sizes, lot sizes, and property prices to the highest possible threshold. There may be far more diversity in post-1950s suburban tracts than in these Celebration look-alikes.

    Further out, Orlando’s more conventional new subdivisions are in a similar condition to those of Phoenix and parts of California. All these trends make for a mixed prognosis for the livability of this region, and the State of Florida overall, after the unsold inventory is finally distributed and occupied.

    Yet despite the global factors working against them, both Orlando and Sarasota still have areas of interesting, special, and authentic quality for which locals and visitors express genuine affection. People who care about the quality of their built environment always seem to find a way to improve it, whether by overt investment in downtowns or in more covert fashion by staging cutting-edge art events in abandoned warehouses. The spirit of a good community seems to be alive, despite the uncertain future of Florida. Due to the intrinsic appeal of warm weather and beaches, a broad cross-section of people will continue to relocate here.

    Florida real estate will certainly continue its colorful tradition, but who will profit in the long run? I think communities that invest in the basics – good education, good jobs, and well-planned infrastructure – will find themselves leading the state’s next resurgence.

    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.

  • An Investment Agenda for the Millennial Era

    By Morley Winograd and Michael D. Hais

    Historians will mark 2008 as the year that started the fundamental political debate that will define America in the Millennial Era. This is not just because Millennials (young Americans born from 1982 to 2003) have propelled the candidacy of Barack Obama but also because their entire civic orientation is now permeating the policy debate crystallized by the nation’s unfolding “financial Pearl Harbor”.

    Clear indications of a shift can be seen in the adoption of the bipartisan bailout proposal and many cases of agreement across partisan lines on what needs to be done now. Both liberals like former Clinton Labor Secretary Robert Reich and conservatives such as former House Speaker Newt Gingrich agree that America should reinvest in its physical infrastructure. They were equally supportive of the need for the country to invest in human capital through a new educational system that would enable America to compete in the global economy. They each acknowledged the necessity for a health care system that would alleviate an ever-increasing financial burden on American families and businesses. From previously and presumably irreconcilably opposite sides of the political spectrum, Reich and Gingrich sketched out an economic growth agenda they could both support.

    Their conversation demonstrated one critical new reality: the demise of the ideologically driven Baby Boomer era of American politics. Although a stubborn majority within the Republican House minority implored its party to stick to its Reagan-era idealism by voting against the rescue package even the second time around, most GOP leaders, especially in the Senate, recognized that if their party didn’t change its rigid belief in free markets über alles, then as one put it, “Heaven help us” in November.

    Interestingly, October 1929 was the last time the market crashed as dramatically as it did on the day the Republicans first voted down their leadership’s recommendation. That event led to the end of America’s previous idealist era, one that also glorified free markets and attempted to enshrine laissez-faire economics as the end-all of U.S economic policy. What followed was an era of government intervention in the country’s economic well-being and an opportunity-expanding fiscal policy led by the civic generation of its time — the GI Generation. That generation supported policies that cut the share of the nation’s wealth held by its richest one percent from 50% on the day of the crash to 30% in 1949. Today’s civic generation, Millennials, are equally determined to reduce the level of economic inequality in America, which was approaching pre-depression levels before the market dived and investment houses disappeared from the landscape of Wall Street.

    Economic jingoists like Lou Dobbs may celebrate the humbling of the nation’s financial elites, but anger and resentment don’t make good economic policy. Instead, Americans will have to learn to behave like Millennials: finding win-win solutions that work for the whole group. The Millennial generation will create a new paradigm of governmental policy with guidelines for behavior established at the national level, but with implementation left to each individual or local community interacting with others in their peer-to-peer networks to make a choice on how best to comply with those national rules.

    This will create a “patient-centered healthcare system” analogous to the Millennial Generation’s fondness for user generated content on social networking sites like YouTube. America’s educational system will be refashioned with schools run as much by kids and their parents as it is by administrators. Just as Barack Obama’s acceptance speech called for individuals to make their homes more energy efficient and for executives to do the same with the companies they lead, energy and environmental policy in a Millennial era will be linked through policies that provide tax incentives along with moral persuasion from the bully pulpit of the presidency to ensure America finally ends its dependence on foreign oil. America’s role in the world will be to lead other nations in the way Millennials expect leaders to behave: finding consensus for a course of action that gains its power from the unity of the group, not the raw strength of the biggest kid on the block.

    This will require the country to make all types of productive investments. As we enter the Millennial era, America will experience changes as sweeping as any the country witnessed in the 1930s and 40s. If the past is any indication of the future, the Millennial Generation will provide the same level of leadership as America’s greatest generation did nearly eight decades ago. In the process the Millennials will put an end to the Boomer era’s destructive clashes of irreconcilable ideologies.

    Morley Winograd and Michael D. Hais are co-authors of Millennial Makeover: MySpace, YouTube, and the Future of American Politics published in 2008 by Rutgers University Press

  • The Toronto Megacity: Destroying Community at Great Cost

    Regional governance is all the rage in some circles in America. But the Canadian experience demonstrates it might not have all the benefits advertised. More than a decade ago, the Ontario government forced six municipalities to amalgamate into the megacity of Toronto. This was not done by the residents of the six jurisdictions. Separate referenda in each of the municipalities (North York, East York, York, Etobicote, Scarborough and the former city of Toronto) all indicated strong disapproval.

    The government claimed that an amalgamated Toronto would be more efficient and that the city would be more competitive. More than $300 million was to be saved, according to the accounting firm hired by the government to study the issue. Early on it was clear that the efficiency claims were bogus. University of Western Ontario urban policy expert Dr. Andrew Sancton quickly raised questions about the analysis, pointing out that the harmonization of labor contracts and services among the six jurisdictions could only lead to higher costs and higher taxes.

    The government was wrong and Professor Sancton was right. By 2003, the Toronto City Summit Alliance reported the amalgamation of the City of Toronto has not produced the overall cost savings that were projected. The Alliance went on to blame “harmonization of wages and service levels.”

    Things have only gotten worse. The city of Toronto budget increased in constant dollar terms and the $300 million in savings have long since evaporated.

    Meanwhile, there is no point in arguing that amalgamation made Toronto more competitive. Despite the impressive residential development in the core, Toronto’s growth rate has become anemic — little more than one-half that of population growth whipping boy, Italy. Between 2001 and 2006, the first full census period after amalgamation, the city accounted for only five percent of the metropolitan area’s population growth. In the period immediately preceding amalgamation (1991-1996), the city-to-be accounted for 30 percent of the growth — six times that of the more recent period.

    None of this is to deny that municipal amalgamations can produce economies of scale. They do — for special interests, not the people. Large corporate interests find larger governments more susceptible to their influence. So too do public employee unions and other well-organized interest groups.

    As city hall is moved farther away, voters have less control over what goes on. There is not only a loss of income for taxpayers, but there is also a loss of community. Indeed, if larger local governments are more efficient, why not abolish municipalities altogether, or even provinces. Surely if all garbage collection were administered out of Ottawa, things would be better, to take the logic of the consolidationists to its extreme.

    Maintaining a sense of local community remains an important virtue. Equally critical, local governments have been proven to be far more cost effective and responsive. This is not just true in Toronto, it is true almost anywhere. There is good reason why municipal consolidation is unpopular — it costs more and it makes city hall more inaccessible. This is the principal reason cities forced into Montreal fled when given the chance. It is why municipal consolidation has led to demonstrations this year in the Australian state of Queensland. Where the scale of government is bigger, people are smaller — something the centralizers never seem to understand.

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