Category: Politics

Hillary Clinton vs. Donald Trump? The Winner Is…the Oligarchy

The real winners in election 2016 are going to be the new-economy oligarchs who are among Clinton’s biggest donors.

This presidential election may have been driven by populist fever in both parties, but at the end, the campaign has left the nation’s oligarchs in better position than ever. As Bernie Sanders now marches to his own inevitable defeat, leaving the real winners those oligarchs—notably in tech, media, urban real estate and on Wall Street—who are among Hillary Clinton’s most reliable supporters.

With either Ted Cruz, or , more likely, Donald Trump, as the GOP nominee, the emerging post-industrial ruling class will have little to no reason to even consider breaking with the Democrats. It’s already clear that companies such as Facebook consider it their duty to stop Trump, and there is a growing tendency among social media firms, including Twitter, to censor unpopular right-wing views.

Clinton, by outlasting Sanders, has done the oligarchs’ dirty work for them. As Greg Ferenstein, who has been surveying Internet billionaires in the Bay Area notes, the tech elite—much like media and Wall Street—have no sympathy for Sanders’s social democracy. After all, it’s much harder to become a mega-billionaire if tax rates for the wealthy soar; much better to show your commitment to things like gender equality, gay rights, climate change from the comfort of San Francisco or Manhattan luxury apartments or soaking in the hot tub in Malibu, Boulder, the Hamptons, or Los Altos hills.

Clinton occasionally apes Sanders’s revolutionary rhetoric in decrying Wall Street and inequality, but this is hard to take too seriously. She and her husband, notes The Guardian, take advantage of the same Delaware tax shelters favored by the ultra rich, including Donald Trump.

Clinton angrily denounced the use of tax shelters revealed in the Panama Papers as “outrageous.” Yet the papers revealed that many key supporters of the Clinton Foundation—including Canadian mining magnate Frank Giusta and financier Sandy Weill—have all indulged in the much-dissed practice of hiding money overseas.

For decades, the Clintons have built their family political enterprise on contributions from the global ultra-rich; between their campaigns and the foundations, the couple has raised, according to The Washington Post, a cool $3 billion, at least a small portion of it coming from Donald Trump. The outrageous foundation fundraising, not to mention her famous Wall Street 20-minute-for-$250,000 speeches, should dissuade anyone from believing Clinton stands as a traditional populist.

A look at Clinton’s finances should tell us all we need to know. When Sanders attacked her for her Wall Street backers, she made a point of saying she had gotten more support from the teacher’s unions (who are arguably less heinous). Her campaign has now received more money (barely) from individuals in the securities and investment industry than in unionized teachers; the finance sector has forked over $21 million to the former Secretary the State, making it the largest source of her donations.

And this gap will likely grow as financiers reject Cruz, whose right-wing gold standard views can’t be popular on Wall Street, and Trump, who is totally unpredictable, something big money people generally do not like. With Jeb Bush out of the race, Clinton has emerged as the clear favorite of the financial moguls, with the exception of outliers like Carl Icahn, who have lined up behind Trump.

Clinton’s biggest individual backers also include a lot of entertainment and media figures. NBC Universal, News Corporation, Turner Broadcasting and Thomson Reuters are amongmore than a dozen media organizations that have made charitable contributions to the Clinton Foundation in recent years, the foundation’s records show.

Overall, four of her top 10 supporters in terms of contributions come from entertainment: Haim Saban, Jeffrey Katzenberg, Steven Spielberg, J.J. Abrams—while seven of the top 20 come from the world of hedge funds and investment banks. In April she raised a cool $15 million at two parties, one in San Francisco, the other in Los Angeles, hosted by George and Amal Clooney.

Clinton’s support base parallels the very changes in wealth accumulation that I spelled out recently in the Beast. Over the last three decades, an increasing share of billionaires have come from finance, tech and media. Oil, agribusiness and manufacturing may be backing the GOP, but these are all losing their market share of the nation’s billionaires.

Of course many younger people in entertainment have preferred Sanders by a huge margin, but some of their pop heroines—Lena Dunham, Demi Lovato, Katy Petty—have dutifully performed for Clinton, reflecting her stranglehold over the Hollywood establishment.

But the most important players in Clinton’s new gentry come from the tech world. Bill Clinton opened this spigot up in 1992, impressing such longtime Republicans as Hewlett Packard’s John Young and then-Apple President John Sculley enough to get their endorsements.

President Obama has deepened these ties, raising $2.4 million for his 2008 campaign and nearly $3.5 million dollars in his 2012 campaign. Tech companies, notably Google, have enjoyed extraordinary influence under Obama, particularly on crucial regulatory issues on telecommunication.

As in entertainment, many rank and file tech workers prefer Sanders, but Clinton has almost universal support among their bosses. Virtually all the leading tech titans—Google’s Eric Schmidt , Facebook’s Sheryl Sandberg, venture capitalist John Doerr, Qualcomm founder Irwin Jacobs, Box CEO Aaron Levie, and Tesla founder Elon Musk and Salesforce.com’s Marc Benioff—have embraced Clinton.

What does all this money mean? Rather than act an avatar of change, like Sanders or even the unpredictable Trump, Clinton will likely govern as the emissary of our new economic elite. She seems certain to side, more than even President Obama, with patrons such as Google and Apple. For all her hawkish image, Clinton has not sided with the FBI or many senators in both parties in trying to rein in the tech firms’ reluctance to help in the investigation of the San Bernardino Islamist shooters.

The new oligarchy also does not have to worry much about too much financial scrutiny under a Hillary regime. After all, Bill Clinton pushed financial deregulation as much as any free-market Republican, and it was under him that Wall Street began to get chummier with the progressives. The late-in-the-day reforms on executive pay recently advanced by the Obama Administration will likely be subject to some delay or obfuscation. Capital gains rates—arguably among the biggest drivers of inequality and particularly tech fortunes—and tax shelters will likely remain untouched.

Clinton’s progressivism will be strongest on issues around gender, race and sexual orientation—that conveniently don’t threaten the financial interests of oligarchy. Green politics also works fine with many moguls, both in Silicon Valley and Wall Street, as subsidies and incentives for renewable fuels have provided pathways to even greater wealth.

Progressive reforms on immigration—likely imposed by executive order—will further help the tech oligarchs, who increasingly depend on H-1B visa holders, while filling the tap with a reliable supply of cheap service workers. As long as cheap technocoolies are included in reforms, Hillary, who has studiously avoided the H-1B issue, will seek to please both the oligarchs and the minority advocacy groups.

Less well served, one can assume, will be the very middle- and working-class voters who have tended toward both Trump and Sanders. Indeed they will find themselves with little protections against the “gig” economy, notably Uber, which has already gained close ties to the party by hiring top Obama aides, including former campaign manager David Plouffe. Cab drivers and hotel workers who may see their jobs threatened by the “gig” tech firms should not expect as much help from a Clinton Administration as they might have gotten from Sanders.

Even worse off will be those who work in energy development. Clinton has already crowedabout wiping out coal jobs, perhaps sensing that places like West Virginia, Wyoming, and Montana appear permanently lost to the Democrats.

The confluence of power that underpins Clinton’s campaign should worry Americans of all political persuasions. The merging of the White House with fund-raising mania of Clintons threatens the integrity of all our institutions. Marrying media and money power should be particularly troubling. As the progressive site Common Dreams asks : “You May Hate Donald Trump. But Do You Want Facebook to Rig the Election Against Him?”

Of course, it is conceivable that Trump or Cruz could still pull an upset, but given their horrific negatives, even worse than Hillary’s, this seems unlikely. Instead next January will likely see a melding of influence, money and power not seen in the past century, as Clinton consolidates both near unanimous support of our emergent ruling class, and the media that they largely control. Rather than a right or left wing upheaval, this election will end up less a celebration of populism than the ultimate triumph of oligarchy.

This piece first appeared in The Daily Beast.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Top image by DonkeyHotey (Hillary Clinton vs. Donald Trump – Caricatures) [CC BY-SA 2.0], via Wikimedia Commons

May 3, 2016
Confronting the Inevitability of Hillary

With her massive win last month in New York, followed up with several other triumphal processions through the Northeast, Hillary Clinton has, for all intents and purposes, captured the Democratic nomination. And given the abject weaknesses of her two most likely opponents, Donald Trump and Ted Cruz, she seems likely to capture the White House this fall as well.

So the question now becomes: How does Hillary govern? She may win a decisive victory over a divided, dispirited Republican Party, but she will not return to the White House with much of the aura that surrounded President Obama. As feminist writer Camille Paglia has pointed out, she is widely distrusted by the majority of Americans, including younger women. Older feminists may worship her as the incipient queen, Paglia notes, but few others seem ready to kowtow.

Instead, Clinton will enter the presidency more disliked and distrusted than any incoming executive in history. Her trajectory, notes Paglia, has more in common with that of Richard Nixon, whose persistent scheming and ample intellect allowed him to win in 1968, another year marked by intense political divisions.

Alternative one: Obama third term

When Bill Clinton entered the White House in 1992, he did so as the standard-bearer for “New Democrats” of the Democratic Leadership Council, a pro-business, pro-individual responsibility faction that captured control of the party from its labor and grievance industry old guard. When I worked for the Progressive Policy Institute, the DLC’s think tank, in the early Clinton years, many powerful interests – greens, feminists, minority advocates, trade unions – opposed many of the Arkansan’s policy innovations, ranging from welfare reform to NAFTA.

Read the entire piece at the Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore from Peoria, AZ, United States of America – Hillary Clinton, CC BY-SA 2.0

May 1, 2016
Would Reaganomics Work Today?

The key drivers that propelled the Reagan economy are now tapped out or out of favor.

The name of Ronald Reagan is frequently evoked by the current contenders to the GOP nomination. Donald Trump speaks admiringly of the 40th President of the United States and uses a truncated version of his 1980 campaign slogan “Let’s Make America Great Again”. Ted Cruz promises to implement Reagan’s solution of lower taxes, lower regulation and a stronger military. Before he bowed out recently, Marco Rubio was equal in his praise. And John Kasich stakes an even more tangible claim by reminding us that he is the only candidate who actually worked with Reagan.

But if Reagan’s economy is something we can reproduce, we should first understand the most important drivers of that economy. Arthur Laffer, the father of supply-side economics, said in 2006 that the four pillars of Reaganomics were sound money, low taxes, low regulation and free trade. In addition to these four, we add our own two which are more contextual enablers than proactive policies: demographics and innovation. It is our contention that the first four would not have succeeded without the last two.

Demographics: Reagan’s time in office coincided with powerful demographic tailwinds, namely a strong decline in the dependency ratio (DR), an accelerated rise in the American work force, and a rich demographic dividend. The dependency ratio (red line in the first chart below) is the ratio of dependents to workers, calculated as the sum of people aged less than 20 and over 64 divided by the number of people aged 20-64. When the US total fertility rate (TFR, the average number of children per woman) declined from 3.5 children per woman in 1960 to less than 2 in 1975, the dependency ratio followed with a lag, falling from 0.9 in 1970 to 0.76 in 1980, 0.70 in 1990 and 0.66 in 2010.

Under the right conditions when the dependency ratio falls, the economy can reap a demographic dividend. With fewer dependents, households are able to divert more of their income toward discretionary spending, savings and investments, helping create more innovative companies that in turn boost the incomes of households. That is more or less the dynamic that propelled the US economy during the 1980s and 1990s.

Looking at the future now, the dependency ratio bottomed in 2010 and is set to rise again from 0.66 in 2010 to 0.71 in 2020 to 0.83 in 2035. This increase is due mainly to the aging of the population and the increased number of dependents aged 65 or over. It is essentially a reversal of the powerful dynamic that benefited the economy in the 1980s and 1990s. The demographic tailwinds seen during the Reagan presidency have turned into headwinds.

In the second chart, we can see that the size of the US population aged 20-64 (red line) rose strongly from 1970 to 2015 and will level off and rise more slowly from here on. The population aged 30-59 (blue line), arguably the most productive and highest-earning and highest-spending segment, rose strongly starting in 1980 and flattened out around 2010. So here again, the two Reagan terms benefited from a rapid increase in the size of the work force. Clearly the most favorable period, the one with the highest acceleration, was from around 1983 to 2000, matching the economic boom of the Reagan to Clinton years.

Note in passing that a similar chart for Europe, America’s top trading partner, shows an even more troubling picture. Excluding eastern Europe and Russia (red line below), the population aged 20-64 will fall from a peak of 267 million in 2010 to an estimated 232 million in 2050. Including eastern Europe and Russia, it will fall from 459 million to 370 million.

(the charts above were derived by populyst from data produced by the UN Population Division).

Innovation: Reagan came to office at a time of great innovations in computer technology. Innovation was then and remains now one of the most potent drivers of the economy. We have every reason to hope that America will remain as innovative as it was in the past. But the rate of innovation will certainly suffer if skilled foreign professionals are unable or unwilling to come and work in the United States because of more restrictive visa or residency policies.

Interest Rates: Reagan started his first term with very high inflation and interest rates. Both started to decline during his presidency, helping stabilize and grow the economy and boosting the stock market. But we now face the risk of deflation. And interest rates are at rock bottom. As shown in the chart below from Goldman Sachs, the 10-year US Treasury yield was near 16% when Reagan took office and it is now at 2%, near all-time historic lows. Real rates are still negative and the Federal Reserve has few options left in its efforts to stimulate the economy through monetary policy.

(click image to enlarge)

Taxes: It is true that President Reagan enacted important tax cuts but these cuts came at a time when the marginal income tax rate was much higher than it is today. The chart below from the Tax Foundation shows that the top rate in 1980 was 70% and is now 39.6%.

The top corporate income tax rate was 46% in 1981 vs. 35% today. And the top rate for long-term capital gains was 28% vs. 20% today (plus a 3.8% Medicare tax since 2013).

Reagan’s tax cuts came at a time when spending on entitlement was relatively small compared to what it will be in the years ahead. Even at current levels of taxation, the federal budget deficit is expected to start rising again due to additional spending on old-age entitlements. The Congressional Budget Office predicts an expansion in the deficit from $439 billion in 2015 to $810 billion in 2020 and $1,226 billion in 2025. (see pages 147-149 of this CBO publication.)

And as shown in the chart below from the St. Louis Fed, the federal debt is now much higher at over 100% of GDP, vs. 31% when Reagan took office.

It seems clear therefore that there is not as much scope for cutting taxes in the current environment as there was in the early 1980s. Unless accompanied by other changes, implementation of a flat tax or general cuts in tax rates are likely to increase the debt and deficit beyond the already high projections.

Free Trade: Opening new markets and lowering trade barriers were cornerstones of US policy in the 1980s and 1990s. If today European demand is slackening and China is entering a slower period, there could be new markets for US exports in the Asian and African frontier markets that are experiencing a demographic boom. Expanding trade to these new markets would spur new demand for American goods.

But free trade is now under attack from parties who argue that too many American jobs have gone abroad to China, Mexico and others. The presidential primaries have shown so far that a non negligible segment of the American electorate has been receptive to this argument. This means that the openness of free trade could in coming years be slowed or indeed reversed.

Adding it all up, the table summarizes the scope for success of Reaganomics today vs. in 1981.

Hoping for a replay of the Reagan years through action on the same economic levers will most likely result in disappointment. Leading 2016 candidates have expressed hostility towards free trade and have called for restrictions on all forms of immigration. In addition, the underlying context is now less conducive to growth than it was in 1981.

Nonetheless, another component of the Reagan formula was a healthy dose of optimism. Economic prospects seemed insurmountable in 1981 but the ensuing boom surpassed expectations. The US economy remains flexible and innovative and will find a way to muddle through until contextual factors improve and higher growth returns.

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master’s in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Photo by White House Photographic Office – National Archives and Records Administration

April 21, 2016
Class and the EU referendum

On June 23rd, voters in the UK get a say on whether to remain in the European Union (EU). The UK first joined what was then called the European Economic Community (EEC) back in 1973, and in a 1975 vote, 67% voted to stay in the EEC. The issue was fairly settled until Conservative Prime Minister David Cameron, under pressure from the right wing of his party and anti EU sentiment, promised an in/out referendum in the Party’s manifesto for last year’s General election. The stakes here are high, and no one really knows what the result of a ‘Brexit’ (a neologism for British Exit) would be.

In recent polls, opinion seems fairly evenly divided, with roughly 40% each for staying and going. While a crucial 20% remain undecided, momentum seems to be with the ‘out’ side. Sentiment towards the EU cuts across party lines in the UK. Broadly speaking, the political establishment want to remain, though significant numbers of supporters, especially in the Tory Party, wish to go. While initially hostile to the EEC, many on the left and in the trade union movement have come to embrace Europe because of its promotion of progressive labour law and working conditions directives, even though the UK has opted out of many of these.

But what about the question of class in all of this? In many ways, class is a central factor, though it is rarely mentioned in debate or in the mainstream media. The UK Independence Party (UKIP), which has been a threat to both Conservative and Labour parties, has made immigration central to its campaigns. UKIP draws much of its support from the working-class, especially those who feel marginalised by the political mainstream, and one of the biggest reasons for this is immigration. According to a recent survey, 55% of voters see immigration as the most important issue in the upcoming referendum. Of course, the issue is being mixed up with the ongoing refugee crisis and the desire of many non-EU economic migrants to come to Britain. This is a difficult and touchy subject for all political parties and for understandable reasons. But immigration was an issue even before refugees began streaming in from the Middle East, because one of the main planks of the EU is the free movement of goods and labour. Any citizen of the EU can choose to live and work in any other member state, and millions of people have chosen to do just that. Migration within the EU, which was seriously underestimated by the previous Labour government, has had very different outcomes in different labour markets. Many eastern and southern Europeans have been attracted to Britain by the promise of relatively high wages, job vacancies, and the fact that English is widely spoken across the continent.

The biggest losers in this migration process have been the indigenous UK working class, who now have to compete with millions of semi-skilled and unskilled workers from across the EU. While there is plenty of anecdotal evidence that UK workers are being discriminated against by recruitment agencies, the best evidence of this practice comes from a high profile case in the English midlands where local people have been effectively excluded from the 3,000 jobs created at a distribution warehouse owned by sports clothing retailing firm Sports Direct. The company apparently preferred to recruit directly from Poland. For working-class voters, the EU’s free market in labour appears to be more about big corporate profits than worker mobility.

Immigration has an impact beyond access to employment. It also affects housing, schooling, and a host of other public services. All of these factors raise questions about the long term stability and sustainability of working-class communities. In many areas in the UK, from big cities to smaller towns, working-class people bear the brunt of all of these issues, and this has turned many towards UKIP and away from Labour as their natural home. Brexit begins to look attractive for those most marginalised by the effects of the free market, who also benefit least from the more positive aspects of EU membership. This situation has been confounded for many by the ways in which, after the recession of 2007/8, the EU has liberalised its markets and toned down its hitherto strong commitment to social legislation. Most notably, this has seen the EU in secret negotiations with the US over The Transatlantic Trade and Investment Partnership or TTIP.

Nothing about the EU referendum is clear or straightforward. Whatever the result of the ballot, the motivations of voters in terms of class may not be clear. The EU had and still has the potential to improve the lives of millions of working-class citizens across Europe, but too often the interests of big business and social elites trump those of ordinary people.

This piece first appeared in Working-Class Perspectives.

Tim Strangleman, University of Kent

Photo by Xavier Häpe – http://www.flickr.com/photos/vier/192493917/, CC BY 2.0

April 19, 2016
Empire State Building Toward Wins for Trump, Hillary

New Yorkers like to think of themselves as ahead of the curve but, this year, they seem to be embracing the most regressive politics. The overwhelming favorite in Tuesday’s primary among Republican candidates – with more than 50 percent support, according to RealClearPolitics – is Donald Trump, the brash New Yorker whose campaign vows to “make America great again.” On the Democratic side, New Yorkers appear to prefer Hillary Clinton, their former U.S. senator and quintessential avatar of the gentry liberals, rather than feeling “the Bern.”

Some of this stems from political causes – for example, Clinton’s close ties with progressives around Mayor Bill De Blasio – or the fact that the New York primary electorate is 30 percent nonwhite compared with 17 percent in Wisconsin. For Republicans, the overall weakness of the state party, a paucity of evangelicals and Ted Cruz’s poorly chosen attack on “New York values” all favor Trump.

But the real driver of Trump’s success lies in the changing social, economic and demographic forces reshaping the Empire State. The city has enjoyed a considerable surge in employment, much of it – roughly one-third – in low-wage jobs. But the real “losers,” to use one of Trump’s favorite terms, has been the middle class, which is disappearing even faster in New York than in the rest of the country.

This distress can be seen in migration numbers. While states like Texas and Florida are gaining hundreds of thousands of new residents, the New York metropolitan area has lost 701,000 net domestic migrants the past five years, after losing more than 1.9 million in the first decade of the new millennium. Greater New York loses net migrants to virtually every big U.S. urban region, even Los Angeles, Philadelphia, Washington, D.C., and Boston, as well as to Atlanta, Dallas-Fort Worth and Houston.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

April 18, 2016
Liberals — Except When it Comes Home

My old boss, Bruce Brugmann, who ran the Bay Guardian, told me early on in my career that you could tell the real politics of a big-city newspaper by the person they endorse for mayor.

Nice liberal outfits like the New York Times support Democrats for president and (typically) governor and US Senate. The SF Chronicle doesn’t endorse many Republicans any more. But when it comes to the local stuff, the decisions on who should run the city where they live and operate and connect with the power structure, the truth comes out.

The Times loved Ed Koch and backed Michael Bloomberg. The paper didn’t endorse Bill DeBlasio in the Democratic primary. The Chron backed Dianne Feinstein, John Molinari, Willie Brown, Gavin Newsom, and Ed Lee.

There’s a perception that cities like SF, because they tend to vote overwhelmingly for Democrats, and send Democrats to the state Legislature and Congress, are by nature progressive communities. And that all breaks down when it comes to local issues, particularly when they involve real estate.

The biggest Democratic Party donors in SF in the 1980 and 1990s were the members of the Shorenstein family, who hosted Bill Clinton at their home. They were also big downtown developers who spent that same Democratic money blocking any attempts to development limits.

Our Democratic member of Congress, Nancy Pelosi, is either missing or on the wrong side on pretty much every land-use and development issue back at home.

Gavin Newsom, who wants to be the next governor of California, got his start in local politics attacking homeless people.

In other words, the gentrification and displacement in San Francisco is happening despite, and I could argue with the concurrence of, some of those “liberal” Democrats who, from a distance, seem much more progressive than they are when you look at their records right here at home.

So we get what I call the David Chiu phenomenon – a person who pushed and promoted legislation backed by and in part written by Airbnb, which has driven thousands of housing units off the market, gets seen as a San Francisco progressive when he’s away in Sacramento.

You can tell what a newspaper really thinks by its endorsement for mayor. And you can tell what a politician really thinks by what they do on the local issues that pit the power structure (in this case, tech, real estate, and the mayor) against the rest of the community.

Which brings me, more or less, to Paul Krugman, the great liberal economist of the New York Times.

Krugman is great on a lot of big national economic issues. He’s terrible when it comes to cities.

The guy famously came out against rent control years ago, when any urban economist with any sense knows that rent control is one of the most powerful tools agaist displacement. It’s what makes an urban middle class possible in a city like San Francisco.

And now he’s saying that cities need to reduce zoning rules and allow more housing, or any height, pretty much anywhere. He praises the idea that NY Mayor DeBlasio is pushing, which is similar to what SF Mayor Lee is pushing, which in essence cedes to the private market the responsibility to provide affordable housing and assumes that some modest percentage of “affordable” units in luxury towers that are geared to the same crooks and despots now in the news will be a real solution to the urban housing crisis.

I shouldn’t have to keep saying this, but I will: You need to build at least 30 percent affordable housing in every luxury project just to stay even, and not make things worse. Which means if you want to add to the stock of affordable housing, you have to force developers to build 40, 50, 60 percent of the units for people of more modest means.

That’s not even on the agenda in SF or NYC.

If we took Krugman’s national approach – the rich ought to pay more taxes to pay for investment in the nation’s service and infrastructure – and applied it to cities, you’d get a very different approach. Urban developer profits have created great fortunes (Shorenstein, Trump); to a great extent, local governments have failed to tax those profits at a level that’s necessary to mitigate the impacts of their projects.

Krugman ought to know that the middle class in an American city is not a natural consequence of capitalism. It requires strict regulations and controls. It means, sometimes, slowing down the booms that make a few rich so that the rest of us have a chance, too.

That’s perfect liberalism, in the old school. Except that these great scholars and writers (and politicians) don’t seem to want to bring those policies back home.

Author Tim Redmond, the former longtime editor of the San Francisco Bay Guardian, edits the online San Francisco publication 48 hills.

This piece originally appeared at 48hills.org.

By Prolineserver (Own work) [GFDL 1.2], via Wikimedia Commons

April 13, 2016
California Leaders Double Down on Dry

“What do we do with this worthless area, the region of savages and wild beasts, of shifting sands and whirlwinds of dust, of cactus and prairie dogs? To what use could we ever hope to put these great deserts and these endless mountain ranges?”

– U.S. Secretary of State Daniel Webster, on the American West, 1852

The drought, if somewhat ameliorated by a passably wet winter in Northern California, reminds us that aridity defines the West. Our vulnerability is particularly marked here in Southern California, where the local rivers and springs could barely support a few hundred thousand residents, as opposed to the 20 million or so who live here. Bay Area, we’re talking about you, too, since about two-thirds of your drinking water is imported.

The prospect of continued water shortfalls – perhaps made worse by climate change – poses something of an existential question for this state. In the past, California met the challenge of persistent dryness much as the Romans did in their heyday, by constructing massive waterworks that connected mountain runoff with the thirsty urban masses. Everything that made California the harbinger of the future, from rich farmland to semiconductors and our great cities, was predicated on water transfer.

Now there is a sense that California’s expansion, its ability to create new communities and industries – outside of a few fields, like media and software – faces insurmountable constraints on water and other resources. This perspective has been favored by greens, anti-development NIMBYs and those who seek to corral all California growth into ever-denser, family-unfriendly environments.

This mindset has been predominant over the past decade, as the state has invested little in new water storage or delivery systems, essentially doing nothing since the late 1970s, when the population was 16 million less. Like the Roman Empire in its dotage, we seem to have decided to live off the blessings of the past, a sure way, it seems, to guarantee a diminished future.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo of Lake Palmdale California Water Project by Kfasimpaur (Own work) [Public domain],via Wikimedia Commons

April 11, 2016
Aristocracy of Talent: Social Mobility Is the Silver Lining to America’s Inequality Crisis

Yes, wealth concentration is insane. But the ways in which wealth is shifting are surprising—and give reason for a little optimism.

In an age of oligarchy, one should try to know one’s overlords—how they made their money, and where they want to take the country. By looking at the progress of the super-rich — in contrast with most of us — one can see the emerging and changing dynamics of American wealth.

To get a sense of these trends, researcher Alicia Kurimska and I tapped varying analyses from the Forbes 400 list of richest Americans. No list, of course, captures all the relevant data, but the Forbes list (I am a regular contributor to that magazine’s website) allows us to look not only at who has money now, but how the dynamics of wealth have changed over the past decade or more.

The bad news here is that our oligarchs are getting richer, and, unlike in the decades following World War II, they are primarily not taking us on the ride. Indeed at a time when middle-class earnings have stagnated for at least a decade and a half, the oligarch class is making out like bandits. This, of course, extends to much of the infamous “top 1 percent.” The share of income of the top 1 percent of households in the US increased from 10 percent in 1979 to upwards of 20 percent in 2010, as famously found by economist Thomas Piketty and Emmanuel Saez.

But if the highly affluent are thriving, the super-rich are enjoying one of the brightest epochs since the days of the robber barons. These people , according toa study by economists Steven N. Kaplan and Joshua D. Rauh, the top 0.0001 percent of 311.5 million US individuals. In constant 2011 dollars, their wealth has grown seven-fold since 1992 — from $214 billion in 1982 to $1.525 trillion in 2011. This at a time when most Americans have endured little or no real income growth.

What we are talking about is a concentration of wealth and power unprecedented since the turn of the last century. According to an analysis by the left-leaning Institute for Policy studies, America’s 20 wealthiest people own more wealth than the entire bottom half of the population—152 million people in 57 million households. The top 100 own as much wealth as the entire 44.5 million-strong African-American population (there are only two African Americans on the list), and the top 200 have more than the entire 55 million-strong Latino population (there are 15 Latinos on the list). To make an international comparison, the 400 have more wealth than the GDP of India, arguably the most up and coming big economy on the planet.

The Rise of the self-made

Not all the news is bad, however. The proportion of the 400 who inherited their money has been steadily decreasing. There are more self-made billionaires than existed in the 1980s. Kaplan and Rauh report that since the 1980s the share who grew up wealthy fell from 60 percent to 32 percent.

This does not mean so much the return of Horatio Alger — the share who grew up poor remained constant at 20 percent — but that most super-wealthy came from affluent but not rich families, which gave them some head start, notably in education.They did not hand the keys to the kingdom to their offspring. Rather than country clubbers clipping coupons, the rich since the 1980s have become largely, if not entirely, self-made.

But origins are not the only thing that has changed in this era of oligarchy. So too have the industries that create the wealth — largely represented by the shift toward technology and finance — and, not surprisingly, where that wealth tends to concentrate. These shifts are already changing not only our economy, but also the outlines of political power, as industries friendlier to Democrats, notably tech and finance, supplant those, notably energy, that have long been associated, particulary in the last decade, with the Republicans.

The shift in the fortunes of the super-rich reflect changes in our industrial structure over the past third of a century. The big winners have been in scalable businesses where capital is king and rapid accumulation possible. Rauh and Kaplan, for example, report that the big winners have emerged not only in tech, but also include owners of retail and restaurant chains, tech firms and private finance, including hedge funds Over the period between 1982 and 2012, finance’s share grew the most, followed by technology and mass-retailing.

Who’s losing ground? The big losers are a bit counter-intuitive. Despite all the attacks on “big oil,” energy has actually suffered the biggest decline in terms of presence on the Forbes list. Energy, for example, used to account for about 21 percent of the 400, but that has shrunk to about 11 percent. Equally puzzling, amidst a high-end building boom (not so much for the hoi polloi), real estate’s share has dropped about as much. Perhaps less surprising are the losses among non-tech based consumer industrial companies.

Since 2012, the year the Rauh study was completed, the tech billionaires have, if anything, expanded their presence, while it’s likely that, with the drop in energy prices, the oil barons will slip even further. On the 2014 list, for example, in terms of dollar gains, five of the top six were from the tech sector, led by Mark Zuckerberg, whose fortunes increased by a remarkable $15 billion (Warren Buffett was the lone exception). Mark Zuckerberg’s gains were larger than the $12 billion increase between Charles and David Koch, even at the peak of the energy boom.

Fully half of the top 10 on the list came from the tech community, with the balance made up of Wall Street/finance people (Buffett and Michael Bloomberg) along with the Kochs and David Walton, the youngest son of Wal-Mart founder Sam Walton.

The New Geography of Wealth

Perhaps more surprising has been the shift in the location of the rich. Despite the rise of the tech oligarchs, the biggest gainers over the past decade have not occurred in California but in New York, Florida and Texas. This reflects not only the power of Wall Street and the investment class (some of whom have decamped to Florida), but the growing diversification of the Texas economy.

Oil, of course, still plays a critical role among the Texas rich, but it’s much more than that now. The richest people in the Lone Star Stateinclude Alice Walton, the Ft. Worth-based heir to the retail fortune, but also Austin tech mogul Michael Dell, Dallas financier Andy Beal, and San Antonio supermarket mogul Charles Butt. The first energy billionaire, pipeline entrepreneur Richard Kinder, clocks in as fifth richest Texan. Even if energy remains weak for the next decade, Texas seems likely to keep producing gushers of billionaires.

If we break the rich list by region, it’s no surprise that New York, long the nation’s premier financial center, would rank first, with 82 billionaires. In second place is the San Francisco area, with 54 billionaires, most of them tied to technology. The Bay Area, with about one-third of the population, surpasses third-place Los Angeles, with 34. Miami ranks fourth with 27, Dallas fifth with 19; each is ahead of the traditional second business capital, Chicago, which ranks sixth with 15, just a few paces ahead of Houston with 12.

The Future of Oligarchy

What is the future trajectory of wealth in America? One thing seems certain: the twin tech capitals of Bay Area and Seattle, now home to nine of the 400, are likely to expand their reach. One clear piece of evidence is age; people generally do not get richer when they retire. In contrast, virtually all self-made billionaires under 40 are techies.

Of course, the biggest growth can be expected in the Bay Area, particularly as tech people think of new ways to “disrupt” our lives – for our own good, of course. Whole industries such as music, movies, taxis, real estate are increasingly controlled from the Valley; as these companies wax, many of the old fortunes made in these fields will begin to wane. This is also true across the board in retail, where Seattle’s Jeff Bezos now looms as a colossus greater than any individual chain of traditional stores.

Ultimately what will make “the sovereigns of cyberspace,” to quote author Rebecca MacKinnon, so dominant is precisely what made John D. Rockefeller so rich: control of markets. Google, for example, accounts for over 60 per cent of Internet searches. It and Apple control almost 90 percent of the operating systems for smartphones. Similarly, over half of American and Canadian computer users use Facebook, making it easily the world’s dominant social-media site.

And soon, they, like the old Wall Street elites or the energy barons, may be able to regard the government as yet another subsidiary. They will benefit greatly from the likely electoral victory of the Democrats, who are increasingly dependent on tech contributions, while the old economy oligarchs already in retreat, in energy, manufacturing and real estate, fade before them.

The prognosis for the future of American wealth, then, is for an ever-expanding role for both tech and private investors, and a gradual shift away from basic industries that are geared to our diminishing middle class. This may not be good for America but will be wondrous indeed for the ever more powerful, and outrageously wealthy, new ruling class.

This piece originally appeared at The Daily Beast.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

April 4, 2016
Even as They Retire, it’s Still About the Boomers

America’s baby boomers, even as they increasingly enter retirement, continue to dominate our political economy in ways no previous group of elderly has done. Sadly, their impact has also proven toxic, presenting our beleaguered electorate a likely Hobbesian presidential choice between a disliked, and distrusted, political veteran and a billionaire agitator most Americans find scary.

Throughout the campaign, boomers have provided the bedrock of support for both Hillary Clinton and Donald Trump. Bernie Sanders may have devastated Clinton among millennial voters, by almost 3-1, but she has more than offset that gap by winning overwhelming support from older voters.

In the South, it was older African Americans, particularly women, who sealed Clinton’s big wins. But older voters of all races have supercharged her campaign elsewhere; she won older voters by 39 percentage points in Missouri and 54 points in Ohio. She also captured upward of 73 percent of their votes in critical states like Virginia.

No surprise that she also did well in Arizona and Florida, states that are major retirement havens. Four of the five areas with the most retirees per capita are located in these two states.

But it’s Donald Trump who arguably was the biggest winner in the boomer wars. He has thrived most in states with aging white populations, notably Nevada, Arizona, Florida, Massachusetts, New Hampshire and South Carolina. He has consistently run five to 15 points better with the boomer generation than among younger GOP primary voters.

Some of this preference is attributable to racist and xenophobic sentiments among older people, who are, for example, typically far less favorable toward inter-racial dating than younger cohorts. Similarly, boomers are far more likely than millennials to harbor patriotic sentiments; only a third of them believe America is the greatest country in the world, compared with half of boomers. Trump’s appeal to “Make America great again” may connect with boomers, but not so much with their offspring.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

March 28, 2016
Trumpism: America’s Berlusconi Moment

Trump envisioned and created today’s city of white boxes for rootless new money types, who dominate the city even as they leave little mark here.

An old joke—that in heaven, the Italians do the cooking; in hell, they run the government—feels a lot darker now that American politics are taking an Italian turn.

Since the fall of Il Duce, Italy has had a staggering 62 governments, and while American doesn’t have that problem yet, our political system is showing all the signs of decline—an inability to come to any consensus, the increased vulgarity of discourse, the utter incompetence of an impenetrable bureaucracy and the growth of extra-constitutional fascist and Mob-like “familial” —run modes of governance—with which Italians have long and unhappy familiarity.

Let’s start with Donald Trump, who the American left now routinely deems an American fascist in the mold of Benito Mussolini. Like Trump, Mussolini (a former journalist) rose rapidly to power as his country was disintegrating from within. Then, too, nationalist resentments were reaching a fever pitch as a large part of the populace—and especially the middle and working classes—lost its remaining faith in the system as economic conditions decayed.

In 1919, for example, there were “cost of living” riots throughout the peninsula as the old governing class lost its grip on the state. Fascism, as Mussolini himself suggested, was predicated on strength—on the use and threat of violence. The disruptive hooliganism of Trump supporters at his rallies evokes the frenzied, violent environment in which Il Duce claimed power in the 1922 “March on Rome,” and held it he was finally ousted and arrested in 1943.

As the Financial Times’  Martin Wolff wrote, Trump follows a pattern that “embodies how great republics meet their end.”

But past results, as the fine print says, are no indicator of future ones and the comparisons between Trump and Mussolini seem overdrawn. Take a breath and recall that Ronald Reagan and George W. Bush, too, were widely dismissed as “fascists” or even Nazis in their time.

Trump clearly has an authoritarian personality , and he appeals to those with that bent, but he’s hardly a true heir to Mussolini. For one thing, Mussolini, like Hitler, was not born into money; they emerged from the life-or-death struggles of the Great War. Unlike those two, Trump does not boast an organized paramilitary black or brown shirt movement.

It is in the nature of his appeal where Trump does resemble the fascist leaders. His followers, like theirs, are people who feel left out of the calculations of the political class in both parties.

In this sense, he shares much with the nationalist parties on the rise across Europe, drawing support from the middle class disgusted by politicians kowtowing to identity and radical green politics, from voters who feel the ruling parties serve not their interests but their donors and well-heeled interests, and who, despite their protestations of comity with their concerns, actually hold their electorate in various shades of contempt.tired of being told that changes they can feel hurting them, are actually helping them, tired of electing politicians who then ask them: “Who are you going to be believe: Me or your lying eyes?”

Members of America’s white working and middle classes, argues Michael Lind, have become an outsiders, even pariahs in their own county: “Lacking any establishment advocates and sympathetic intellectuals, on left, right or center, many white working class Americans have therefore turned to demagogic outsiders like Trump. Where else are they to go?”

The Donald speaks not only to the their fears haunting the middle class, but also their pride: he wants them to be proud of the country’s past. Some insist the real Italian model may not Mussolini but a more contemporary figure, former Prime Minister Silvio Berlusconi. Like Trump Berlusconi was a successful entrepreneur and also a loudmouth.   who appealed to Italians by denouncing “political correctness” as well as the weakness and corruption endemic to the Italian state.

If so, there’s some room for hope. Unlike Mussolini, Berlusconi never succeeded in overturning the constitutional order.

Whichever comparison is more apt, there’s little doubt that iIn the run-up to the seemingly inevitable, horribly depressing face-off with Trump, we can count on Hillary Clinton and her reliable press minions to keep raising these Italianesque models. Trump will be dressed as a fascist, or even a Nazi, for breaking with the politically correct consensus. Like Berlusconi, he will be investigated for his numerous moral lapses—both personal and business—and, by November, will be about as attractive to much of the electorate as Mitt Romney without his noblesse oblige or respectability.

American Donna

If Trump is tarnished, that’s a good thing. But ihis political demise would sadly t’s one that opens the door to another ugly Italian model, the less public but arguably more effective one followed by Hillary Clinton and much of the Democratic Party.

Clinton, notes journalist Jamelle Bouie reflects a machine model, with control of the party itself as a goal. Rather than an ideological figure, she “appeals to stalwarts and interest groups (like banks and industry) far more than voters who choose on ideology and belief.”

This approach approximates, more than anything, the structure—though not the actual violence—of the Mafia, with “families.” .These groups that represent distinct, sometimes interlocking, interests, each functioning with almost total dominion over its respective turf but able to process competing demands through a central “commission” like the New York based one founded in 1931—when organized crime, incidentally, was under assault by fascist Italy.

Under a second President Clinton, the Democrats will operate under a similar system, with Wall Street, tech oligarchs, greens, feminists, gays, African-Americans, public sector unions, universities, Latinos, urban land speculators sitting around the table and her as il capo di tutti capi.

She won’t have much patience for legal niceties, having already pledged to circumvent Congress if they won’t do her bidding. What drives progressives crazy. about the former Secretary of State is not centralism – they generally supported Barack Obama’s rule by decree – but the very pragmatism that grows naturally out of this kind of familial structure.

These “families” have already played a critical role in helping bankroll the Clinton machine, both in the form of the family Foundation, whose donations have reached close to $3 billion, and her campaign. Raising money from the oligarchy, as Bernie Sanders has noted, makes it much less likely she will challenge their vital interests in a concertedfashion.go after their influence.

Under a Hillary Clinton Administration, the Commission will be far more important than either under her husband or Barack Obama. Unlike these two articulate and charismatic leaders, Clinton inspires little loyalty outside of the “families.” She will not, for example, tackle entrenched interests like the teachers’ unions, which, to his credit, President Obama has been willing to do.

To be sure, a Commission-style government may not seem as scary as one run by an unpredictable and vulgar billionaire. Yet it could prove, in its own way, even more effectively authoritarian. Already critical Democratic “families” such as the universities, the tech world and even the media have become centers of censorship and ideological conformity. Their cultural influence, already pervasive, is likely to become even greater.

And in choosing a Mafia model, Clinton is adopting a system that lasted longer than thefascisti and thrived through systematic intimidation of its rivals. A Clinton Commission may not cause sleepless nights, as a prospective Trump Administration might , but it hardly represents an edifying future for this most, at least to date, successful of republics.

This piece first appeared in The Daily Beast.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Berluscony photo by alessio85 (flickr) [CC BY 2.0], via Wikimedia Commons

March 23, 2016