New Geography

Category: Politics

  • The Politics Of The Next Recession: How A Bust Could Impact The 2016 Elections

    In this hyper-political age, perceptions about virtually everything from the weather to the Academy Awards are shaped by ideology. No surprise then that views on the economy and its trajectory also divide to a certain extent along partisan lines.

    How the public perceives the economy will have a major impact on this year’s elections. That most are already discouraged cannot be denied;  the negative sentiment has propelled the rise of such seemingly marginal political figures as Donald Trump and Bernie Sanders. But will the economy prove a bother to the Democrats?

    A lot depends on where you live and what you do. Much of the country is not doing so well; despite a strong two-year run in job creation, some 93 percent of U.S. counties still have not gained back all the jobs that they lost in the Great Recession, according to the National Association of Counties.

    Yet many liberals believe the economy is shipshape. Paul Krugman, the progressive economist, hails the “Obama boom,” citing rising employment, some slight income gains and, at least until recently, a soaring stock market.

    Krugman and others point to California, the epitome of true-blue virtues, as having what one progressive journalist calls a simply “swell” economy. Rarely mentioned is the fact that, for the past two decades, the state’s economy has more often underperformed national averages.

    More serious still, the same state that boasts Silicon Valley also suffers the highest poverty rate in the nation. Overall nearly a quarter of Californians live in poverty, the highest percentage of any state, including Mississippi. According to a recent United Way study, close to one in three is barely able to pay their bills.

    A slowing economy and weak stock market, in contrast, does offer some solace to Republicans, who clearly see a political opportunity. Even at its best, this has been a slow growth recovery and while the official unemployment rate has improved sharply, labor participation rates remain depressed by historical standards. Millions of young people remain in their parent’s homes as opposed to engaging the economy, buying homes, and getting onto adulthood.

    The End Of The Asset Boom

    America may not be in as bad shape as Republicans and conservatives like to insist. Certainly compared to Europe or Japan, we’re in great shape. While some doubt weakness in China really poses a danger to the U.S. – exports account for only 13% of U.S. GDP, after all, and China is not one of the largest markets for U.S. goods — David Stockman, among others, argues that China’s slowdown is due to a dangerous phenomenon that is present in the U.S. as well: a disastrous level of debt. Some Democratic economists like Larry Summers, as well as economic gurus such as Mohammed el-Erian, warn that we should at least prepare for the possibility of recession.

    Certainly the China crisis threatens the trajectory of certain blue cities. Money from China and other parts of Asia has helped propel real estate markets in places like coastal California, New York and San Francisco. China has also been a major source of tourists and consumers for high-end electronic products that are at least designed and marketed here.

    Similarly California’s tech boom also seems to have reached its apogee. The fact that Silicon Valley types have gotten rich appears to have done little for the average American, and done very little to improve productivity. With the market looking on with greater skepticism, several major players — Groupon, Yahoo, Twitter, for example — seem vulnerable. If a full scale bust is not imminent, a downturn in valuations, and likely employment, seems inevitable.

    A slowdown in the Valley could place the blue bastions in an uncomfortable situation, exacerbating splits already evident in the Clinton-Sanders clash. The mega-profits enjoyed by sectors close to the Democrats, notably Silicon Valley, media and a large part of finance, have encouraged progressives to advance an ever more expansive, and expensive, liberal agenda. With billionaires stalking the streets of San Francisco, who could possible oppose a big boost in the minimum wage, family leave, massive transit projects and the provision of subsidized housing.

    Progressives may detest the investor class that has gotten rich in the “Obama boom,” but they remain deeply dependent on them to finance their green and social agendas. California’s coffers have been filled in recent years largely by the huge rises in income and capital gains among the investor class, who are well represented in the Golden State. Similarly New York Mayor Bill de Blasio’s aggressive agenda for new housing and expansion of social programs depends largely on the continued looting of the economy by Wall Street.

    The developing decline in asset values threatens the progressive agenda, and could set up a major battle between key progressive constituencies — rich liberals and those dependent on public sector spending. The fundamental incompatibility of ever-expanding pension liabilities and the provision of basic public services is becoming painfully clear in places like Chicago and Detroit, and smaller cities like San Bernardino and Stockton. More of blue America could join them if asset values continue to drop.

    A nascent recession would almost certainly spark something of a civil war between the traditional left constituencies and the kind of business progressives one finds in Silicon Valley, Wall Street and the media industry. A first stage of this conflict is already emerging in California, where former San Jose Mayor Chuck Reed has been seeking to rein in the state’s unfunded $350 billion pension liability. Silicon Valley largely has backed Reed’s past efforts, which has elicited a fierce blow-back by the public employee unions and their political allies.

    Blue And Red, Reinforced

    A recession would change many things, but not enough to challenge Democratic dominance in California, New York and other parts of the “blue wall.” Unemployment could double and Hillary Clinton — perhaps even Bernie Sanders — could win these places in a walk. After all, Jerry Brown was elected and then re-elected when California’s economy was still struggling to recover. Theoretically, the cost of energy, the lack of water for farms, and a decaying infrastructure should provide an opening for Republicans, but as middle income families continue to move elsewhere, the shift to a single, childless, minority and immigrant demographic makes any successful GOP makeover all but impossible.

    Instead of pushing them to the GOP, a recession could further radicalize the Democrats but not upset their control of dark blue states. But the deepening decline in the real tangible economy — energy, manufacturing, agriculture — could prove a boon to the GOP in much of the rest of the country.

    Before the decline in oil prices many areas in the middle of the country enjoyed a gusher in energy jobs, providing high wage employment (roughly $100,000 annually, exceeding compensation for information, professional services, or manufacturing). Due largely to energy, states such as Texas, Oklahoma, North Dakota have enjoyed consistently the highest jobs growth since 2007, and were among the first states to gain back all the jobs lost in the recession.

    Of course, tough times in red states like Texas, Oklahoma, Louisiana and North Dakota will only pad Republican gains. But there are other, contestable heartland states — Ohio and Pennsylvania, in particular — that also benefited from the expansion of fracking, which created whole new markets for manufactured products like pipes and compressors. Similarly, the administration’s directive to crack down on coal plants could be problematic for Iowa, Kansas, Ohio, Illinois, Minnesota and Indiana, which rank among those most reliant on coal for electricity. Not surprisingly much of the oppositionto the EPA’s decrees come from heartland states.

    Right now virtually every Great Lakes state, except Illinois, enjoys unemployment rates below the national average and several, led by the Dakotas, Minnesota, Nebraska and Iowa, boast among the lowest in the nation.

    But with energy, agriculture and manufacturing slowing down, the prospects for the middle of the country have turned increasingly sour. A manufacturing decline might not matter much to New York, where the sector accounts for barely 5 percent of state domestic product but industry accounts for 30 percent of the economy in Indiana, 19 percent in Michigan. If the current trends hold, the case for the “Obama boom” in this vast swath of America may be further weakened.

    To the problems of regulation and market turbulence, manufacturing economies are also threatened by the rising value of the dollar, which threatens the Rust Belt’s prime exports and bolsters competitors, both in Europe and Asia. After all, manufactured goods are the leading export in much of the upper Midwest while food exports, also hard-hit by the hard dollar, dominate many Great Plains economies. In 2012, a recovering Rust Belt was critical to President Obama’s victory; a weakened industrial economy could make Republicans more competitive in the region, particularly if they nominate an electable candidate.

    Will A Recession Create A New Politics?

    Until the stock swoon, few commentators focused on the political implications of what very well may be an emerging recession. After all, if coal miners in West Virginia lose their livelihoods, it hardly effects the lifestyle of Capitol bandits a couple of hours away, and eliminating oil jobs in Bakersfield doesn’t cramp the style of tech moguls who don’t ever get their hands dirty. But with the stock market in sharp decline, the affluent may soon be feeling some of the angst felt by many middle and working class people during the “Obama boom.”

    Indeed because President Obama’s policies are so identified with progressivism, a recession now could undermine support for his bank-friendly, super-green policies. The chimera of green jobs never had much reality, but low energy prices inevitably weaken the renewable sector. In times of asset inflation, losses on the farm, the factory, the mine or the drilling platform can be dismissed as part of “disruption” and progress, but what happens if other linchpins of the economy, notably tech and finance, begin to wobble as well?

    If nothing else, a weaker economy will accelerate the increasingly populist tone of the Democratic Party, as epitomized by Senator Bernie Sanders’ remarkable rise. The kind of neo-liberalism epitomized by the Clintons rested on financial support from Wall Street, Silicon Valley and media companies. This support has become something of a liability for the former Secretary of State.

    But the most important political impact of a slowdown or new recession, will be in the heartland, where elections are often won. Yet logic seems on a holiday in a Republican Party which seems to feed on resentment but produce little in the way of practical solutions. Indeed front-runners like Donald Trump and Ted Cruz thrive not by addressing economic growth but focusing instead on anxieties relating to immigration, Islamic terrorism and cultural change. Amidst an incipient recession, or at least a serious slowdown, after a weak recovery, Republicans should be able to make some gains, but to do so they have to give some glimmer of having the chops to turn the economy around.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of 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

     

  • American Extremism is a Product of American Apathy

    Much research has gone into studying the political polarization that has gripped American politics. Why have the two American parties moved to the extremes? One explanation, championed by MIT Professor Noam Chomsky is that the Republicans have ceased to be a functioning party. Chomsky claims that the GOP has wholly given itself over to the rich, and in order to win elections has been forced to appeal to the radical fringes of American society, who he defines as Evangelicals, nativists, racists and gun fanatics.

    Peter Wehner, Senior Fellow at the Ethics and Public Policy Center, argues that rather than the GOP moving to the right, it’s the Democrats who have moved dramatically to the left. Wehner argues that while Bill Clinton revived the Democrats from nearly twenty years of political defeats by abandoning left-wing politics and embracing centrist policies, Obama ran as an unabashed liberal, and today Hillary Clinton and Bernie Sanders have only followed suit. There may be other, less directly political reasons.

    A Princeton study claims that political polarization has been a frequent occurrence as inequality has increased in the United States, and extremism has been a regular response to economic woes. Another study by UC Berkeley places the blame not on the parties or society, but on the voters themselves, who political scientist David Broockman argues have spontaneously become fanaticized, even more so than their representatives.

    These are all interesting ideas, but most lack hard numbers, and what little numbers are offered come from selective results of specific poll questions asked to a few thousand people at most. If we were to look at the total voting practices of the American people, what insight could we draw? I set about to do just that and have concluded that the driving force of political polarization in America is from profound voter apathy. I am not saying that Chomsky, Wehner, Broockman or any other political theorists are necessarily wrong, but while their arguments seek to explain why the two extremes have become ascendant they fail to address or minimize the shocking disappearance of the moderates in both parties. The disappearance of the center, particularly in the primaries, explains political polarization in America, not the rise of the fringes.

    Pundits and political experts have placed far more emphasis on primaries over the past six years due to the rise of the Tea Party. Despite the evident surge in media attention by elites and massive donations by the super-rich on both sides, the presence of voters in the primaries has been collapsing to all-time lows. In 1972, 30.9% of registered voters participated in the primaries. That number has dropped nearly every year, to 21.7% in 1992 at the beginning of the Clinton era, and 19% in 2000. In 2008, in the heavily-contested race between Clinton and Obama, primary turnout hit 30.3%. But that spike proved to be a one-time oddity, as in 2012 the primary voter rate for both parties declined to an all-time low of 15.9%, or nearly half the rate forty years ago.

    What makes this even more striking is an accompanying decline in total voter registration. In 1972, 72.3% of Americans eligible to vote were registered. In 2012 that number dropped to 65.1% (in 2014 this declined further to 64.6%) for a 7.9 percentage point difference. The drop in voter registration combined with a drop in primary voter participation of eligible voters has resulted in an overall decline of 54% in primary voter participation from the last generation to the current one. More than half of voters have ceased to engage in the ideological formation of our two parties in any meaningful way, leaving the most die-hard 46% to dominate politics. To put that in perspective, let us hypothesize that 7 out of 10 Republicans and a similar 7 out of 10 Democrats have moderate, mostly rational views. Now imagine that the most moderate 5 of 10 left each party; this would leave a distribution of 3 fringe voters for every 2 moderates. Even if the center had previously been the supermajority a drastic decline of the sort we have witnessed between 1972 and 2012 could easily explain the sudden extremism of the party. This demographic collapse in primary voters may explain the rise of extremism far better than the supposition that the majority of people on the right and left have substantially changed their ideologies and adopted extremist positions.

    Any serious conversation on the polarization of American politics cannot ignore the drop in primary voters, though up to this point it mostly has. While the general elections decide whether conservatism or liberalism are dominant at the time, the primaries decide what conservatism and liberalism are. In 1972 when twice as many Republicans participated in the primaries, some of the main points in their platform were nuclear arms reduction, increased government protection for the environment, a 7% tax increase on those making $100,000 or more, and the increase of “trade and cultural exchanges as ways of improving understanding between [the U.S. and China].” In 1972 the DNC supported the Drug War and efforts to maximize coal efficiency. These policies would be unthinkable to GOP and DNC primary voters forty years later. This may have more to do with the fact that the most moderate 60% of voters have disappeared from the political landscape, rather than a change in ideology from the majority of voters.

    What effect does the disappearance of the center have on the structure of American politics? To understand this it is necessary to first outline the general election process. Of the 322 million American citizens only 208,012,000 (64.6%) are registered to vote. 32% of Americans identify as Democrats while 23% identify as Republicans or 67 million and 48 million respectively, with the rest identifying as Independent or belonging to third parties. In 2012, Mitt Romney was only able to win 10 million votes out of 19 million primary votes cast on his way to the nomination. Considering that the Republican Party has 48 million members, hardly a third of Republicans showed up to the polls, perhaps fewer due to Independents voting in the twenty-seven open primaries. The Democratic Party appears to have even lower turnout than the Republicans based on the 2004 race, but even if the Democrats exhibit similar voting patterns, one can expect less than 27 million to vote, in a party comprised of 67 million people.

    Furthermore, one only needs around 50% of the primary vote to win the nomination, and the last two primary competitions were near that figure (53% for Romney 2012, 47% for Obama in 2008). In order to win the GOP nomination Trump, Cruz, Carson or whoever takes 2016’s trophy will only need to win in the range of 10 million votes, or 3% of the total US population. Meanwhile, in order to win the DNC nomination, Clinton or Sanders will only need to win roughly 14 million votes, or 4% of the total US population, meaning that the ideologies of America’s two ruling political parties are decided by a mere 7% of the total population. To put this in perspective, in 1972, 22.3% of Americans who were eligible to vote participated in the formation of their party’s ideology.

    Chomsky and Wehner are not necessarily wrong. Perhaps the GOP has become too dependent on rich donors to connect with the average voter, while the Democrats have moved too far to the left for many who constituted Bill Clinton’s former base. But what is clear is that forty years ago nearly a quarter of eligible Americans voted in the primaries, playing a direct hand in the formation of their party’s ideology, while today that number is closer to one in ten. While the near-universal consensus among pundits and political theorists is that politics has become too polarizing, this extremism has emerged not from fanaticized voters, but from an apathetic middle that has almost completely disappeared from the political landscape. The absence of moderate voters has only had a multiplying effect, as extremist candidates drive out even more centrists from the voting pool.

    Gary Girod is currently pursuing a Ph.D in modern Western European labor history at the University of Houston, and graduate of Chapman University.

  • Trump, Sanders, and the Precariat

    While the white working class is shrinking in the US, it remains the largest voting block in the country. That may be why leaders of both parties are concerned that white working-class voters, especially in the Midwest and South, are supporting populist candidates like Donald Trump and Bernie Sanders. They don’t understand that many of these voters blame Wall Street, corporate leaders, and politicians – the East Coast establishment –for destroying their jobs and communities over the past few decades.

    Recent polls suggest that almost 60% of Americans, both Democrats and Republicans, “don’t identify with what America has become.” According to Cliff Young and Chris Jackson, these “nativist” Americans are older, whiter, and less educated than the rest of the population – more working-class, in other words. For some middle-class professionals, this “nativism,” exemplified in support for Donald Trump’s racial comments, simply reinforces the assumption that the white working class is inherently racist and foolish. They conveniently ignore the way racism is resurfacing among the middle class as they, too, feel resentment over their economic displacement. As Barbara Ehrenreich warns, “Whole professions have fallen on hard times, from college teaching to journalism and the law. One of the worst mistakes this relative elite could make is to try to pump up its own pride by hating on those — of any color or ethnicity — who are falling even faster.”

    The focus on racism and xenophobia ignores an essential reality: precarity is bringing working-class and middle-class voters together politically. As Guy Standing has argued, the emerging precariat is a political class in the making. We see this in the “Fight for $15.” The struggle to increase the minimum wage seeks economic improvement for both the non-college and college educated.

    This growing political block not only shares economic resentment but also the underlying racism that has been baked into American culture. No doubt, many college-educated whites looking for work have blamed multiculturalism and affirmative action for their current economic position, and they are just as likely as working-class people to respond to Trump’s racist rhetoric.

    As Dan Bolz has suggested, “Trump’s appeal . . . underscores the resistance to the changes the country’s transition have brought forward.” Paul Krugman has suggested that “moderate Republicans and Third Way Democrats” who had tried to explain inequality in terms of skill-biased technological change are now lamenting the rise of Democratic populism. At the same time, progressive Democrats have complained that Sanders has ignored racial inequality while pandering to those facing economic inequality.

    Leading Republican pundits like David Brooks and George Will have tried to dismiss Trump, a sure sign of conservative establishment fear. This has led to a squabble with Will calling Trump a “bloviating ignoramus” and Trump responding that Will is the “dumbest and most overrated political columnist of all time.” Some would say that Trump’s attack on political correctness and emphasis on “hot button” issues offer just type of mud fight the white working-class base wants. But more thoughtful moderate Republican pundits understand that such battles will not secure that base. For example, writers like Ross Douthat and Michael Gerson have been ignored and marginalized by the Republican establishment. A decade ago, Douthat and Rahein Salem tried to solidify working-class support by developing sound policy proposals that would appeal to what they called “Sam’s Club” Republicans. The Republican establishment trashed their ideas, and these writers have been reduced to rehashing the social values debate of an earlier era. E.J. Dionne has said Republicans are having trouble taking on Trump not only because “they have delivered next to nothing to their loyal white, working-class supporters.”

    The Democratic Party establishment has its own set of fears — about Bernie Sanders. With significant contributions from Elizabeth Warren, Sanders has tried to move the party to embrace policies that are consistent with its New Deal roots. In a speech at Georgetown University, Sanders stressed the disappearance of the middle class, noting that productivity gains and income have been going to 1% of Americans. According to Sanders, a handful of oligarchs now control economic and political life in the U.S. He reminded the audience of the fight over New Deal reforms and types of security it brought to working Americans. Sanders’s takeaway was that “True freedom does not occur without economic security.”

    Hillary Clinton has much less appeal for many working-class and minority Democratic voters. While she has sidestepped her past support for her husband’s policies on crime, drugs, welfare, and trade, these voters have not forgotten his legacy. In commenting on these issues, Clinton tends to pander to voters, as when she says that she opposes the Trans Pacific Partnership (TPP “at this time.” No wonder polls consistently show that the American public doesn’t trust her (though polls suggest they do trust Hillary more than the current crop of Republican candidates on some issues).

    The Democratic establishment doesn’t worry about Clinton’s occasional forays in populism, which they see as political maneuvering. As Politico has reported, “None of them think she really means her populism.” But Sanders’s populist talk makes them cringe, because he connects with working-class resentment. His speeches appeal to the deep sense of injustice, unfairness, and inequality that many in the new precariat, especially millennials and African Americans, feel toward the East Coast establishment that took away their jobs, houses, and community and now even threatens their Social Security.

    Clinton’s wealthy donor base recognizes Sanders’s appeal as a threat to their interests. Democratic Party leaders and their Wall Street backers hope that the Sanders fever will pass quickly and their adherents will then fall in line and embrace Clinton as the only viable option.

    If Clinton and her advisors can’t connect with the new populism, voters may well heed the implication from Republicans that nothing will change no matter who is elected. They’re wrong, of course. With a fragile and deeply unequal economy and an aging Supreme Court, the stakes are too high.   But if Democrats are to win this year, they must understand that the populism that drives support for Trump is also central to Sanders’s appeal. Winning the 2016 election will require the kind of grassroots support that helped elect President Obama twice, but to build that support Democrats will have to address the disaffection and resentment of the new precariat.

    This piece first appeared at Working Class Perspectives.

    John Russo is a visiting fellow at Kalmanovitz Initiative for Labor and Working Poor at Georgetown University and at the Metropolitan Institute at Virginia Tech. He is the co-author with Sherry Linkon of Steeltown U.S.A.: Work and Memory in Youngstown (8th printing).

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

  • Land Regulation Making Us Poorer: Emerging Left-Right Consensus

    There is an emerging consensus about the destructiveness of excessive land use regulation, both with respect to its impact on housing affordability but also its overall impacts on economies. This is most evident in a recent New Zealand commentary.

    New Zealand

    Both the center-Left and center-Right have come together in agreement on the depth of New Zealand’s housing affordability and its principal cause, overly restrictive urban planning regulations. Labour Party housing spokesperson (shadow minister) Phil Twyford and Oliver Hartwich, executive director of the New Zealand Initiative, wrote in a co-authored New Zealand Herald commentary:“Our own research leaves no doubt that planning rules are a root cause of the housing crisis, particularly in Auckland…” (See: “Planning Rules the Cause of Housing Crisis.”).

    The Labour Party is the largest opposition party in Parliament, and has traded governing with the currently ruling National Party more than eight decades. The New Zealand Initiative is "an association of business leaders that is also a research institute."

    Planning and the New Zealand Housing Crisis

    New Zealand’s housing crisis has been building for more than two decades. New house construction has fallen dramatically. According to Twyford and Hartwich, house construction has declined nearly 40 percent from 1973. At the same time the demand for housing has increased. The authors note that New Zealand’s population has increased 50 percent since that time. The housing shortage is further exacerbated by the falling average size of households, which means more new dwellings are required than  indicated by the increase in population

    Across the Pacific nation, far more restrictive land use regulations have been adopted, including urban containment boundaries (urban growth boundaries), which have been associated with higher house prices relative to incomes. Before the imposition of strict land use regulation, houses typically cost three times or less that of household incomes. Since then, house prices have double or tripled relative to household incomes. Twyford and Hartich note that houses now cost a “severely unaffordable” 9 times household incomes in Auckland: They say that “A big part of the problem in Auckland is escalating land costs. Linked to this, too few houses are being built. The houses that are being built are too expensive.”

    Twyford and Hartwich indicated an even broader general agreement, endorsing comments by the ruling National Party government’s as indicated by Deputy Prime Minister Bill English: “It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply on responsive to demand” (also see: "Planning has Become the Externality")

    Broad Consequences

    Twyford and Hartwich starkly described the consequences of New Zealand’s urban planning regime.

    “Rising house prices are making us poorer as a nation. They force people to spend an ever larger proportion of their incomes on housing, and it ties up vast amounts of the nation’s wealth in housing instead of investing it in businesses that create jobs and exports.”

    Twyford and Hartwich also agreed that there is more than enough blame to go around for the mess that has arisen in New Zealand (a criticism that would be appropriate across Australia, the United Kingdom, some markets in the Unites States and the largest markets in Canada):

    "Because this is a national housing crisis that has grown over decades and under governments of different hues, playing political blame games is pointless. You cannot solve problems in retrospect. We need to face the facts and work together for real reform."

    The authors identified three issues for reform: “First, urban growth boundaries driving up section costs. Second, anti-density restrictions stopping affordable housing. Third, the expensive and inefficient way we fund infrastructure.” They also indicated a familiarity with the economics of development fees (also called impact fees”), often missed by planners in Australia, Canada, the United States and elsewhere. “Even though developers nominally pay for all these costs,” “they note, these costs “are immediately passed on to the new home-buyer.”

    Twyford and Hartwich propose what they refer to as "modest" reforms:

    “• Instead of using urban growth boundaries, empower communities to protect places that are of special character and value to them.

    • Free up density and height controls and rely more on high urban design standards including requirements for open and green space, to allow more affordable housing in the city. Let the market discover where and how people want to live.

    • Take developers out of the business of financing new infrastructure. Instead, spread the cost over the assets’ lifetime, either by issuing local government bonds or establishing Community Development Districts” (These could be similar to the Municipal Utility Districts of Texas).

    Importantly, in their second proposal, Twyford and Hartwich exhibit the appropriateness of consumer choice in housing. As in other goods and services, consumers should be free to make their own housing choices, rather than being limited to those permitted by urban planning  decrees. Yet, urban planning, in recent years, has attempted to reduce house sizes and force higher densities, attempting to drive many households into smaller houses and into condominiums who prefer larger detached houses. 

    The concluded that:

    "It is an issue of national importance and concerns all of us – all councils and political parties, developers and the wider business community – and of course the people of this country who would benefit the most from restored housing affordability.

    The time for reform is now."

    The Twyford-Hartwich commentary follows other significant developments in New Zealand.

    Indicating the depth of concern about the impact of planning policies on housing prices, the city of Auckland’s Chief Economist has proposed setting a target to nearly halve house prices relative to incomes over the next 15 years (to a price-to-income ratio of 5.0, compared to its now reported near 10). This represents an important turnaround in thinking in the city.

    Moreover, economic research produced recently for the  Productivity Commission of New Zealand indicated that the housing market distortion has become so bad that “After controlling for a range of other influences, the gradient in land prices (per hectare) from Auckland’s CBD to the rural land adjacent to the city undergoes a step change at the point of the MUL [metropolitan urban limit or urban containment boundary].” The differential was identified at approximately 10 times and the Commission noted that the land value gap has “increasingly binding as housing demand pressures have intensified” (Note 1).

    The Emerging International Consensus

    Consistent with the Productivity Commission recommendation, London School of Economics professors Paul Cheshire, Max Nathan and Henry Overman, in their recent book, Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom, that (see: “People Rather than Places, Ends Rather than Means”):

    “…observed price discontinuities – the difference in market prices across boundaries categories – should become a ‘material consideration’ leading to a presumption in favour of any proposed development unless (a very important ‘unless’) it could be shown that the observed monetary value of the discontinuity reflected wider environmental, amenity or social values of the land in its current use.”

    Shortly after the Twyford-Hartwich article, George Mason University professor Ilya Somin wrote of an “emerging cross-ideological consensus” in his Washington Post column. Somin mentions economists perceived as representative of right of center and left of center positions, such as Harvard’s Edward Glaeser and Nobel Laureate and New York Times columnist Paul Krugman, as well as Jason Furman, Chair of the White House Council of Economic Advisors. He quotes Krugman: “this is an issue on which you don’t have to be a conservative to believe that we have too much regulation.”

    If there is any issue that the Left and Right should be able to unite around, it is policies that keep cities affordable (a prerequisite to livability) not only for both the threatened middle-class and for lower income citizens. More than 40 years ago, legendary urbanist Sir Peter Hall’s raised these as principal points in his critique of urban containment policy. Twyford, Krugman, Cheshire and Harwich are right. This is not an ideological issue but one about the human future in our cities.

    Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism (US), a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California) and principal of Demographia, an international public policy and demographics firm. He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

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    Photograph: Phil Twyford, Labour Party housing spokesperson (shadow minister)

  • New Report: Building Cities for People

    This is the introduction to a new report: “Building Cities for People” published by the Center for Demographics and Policy. The report was authored by Joel Kotkin with help from Wendell Cox, Mark Schill, and Ali Modarres. Download the full report (pdf) here.

    Cities succeed by making life better for the vast majority of their citizens. This requires less of a focus on grand theories, architecture or being fashionable, and more on what occurs on the ground level. “Everyday life,” observed the French historian Fernand Braudel, “consists of the little things one hardly notices in time and space.” Braudel’s work focused on people who lived normal lives; they worried about feeding and housing their families, keeping warm, and making a livelihood.

    Adapting Braudel’s approach to the modern day, we concentrate on how families make the pragmatic decisions that determine where they choose to locate. To construct this new, family- centric model, we have employed various tools: historical reasoning, Census Bureau data, market data and economic statistics, as well as surveys of potential and actual home-buyers.

    This approach does not underestimate the critical role that the dense, traditional city plays in intellectual, cultural and economic life. Traditional cities will continue to attract many of our brightest and most capable citizens, particularly among the young and childless. But our evidence indicates strongly that, for the most part, families today are heading away from the most elite, more congested cities, and towards less expensive cities and the suburban periphery. (See report appendix “Best Cities for Families”)

    New York, San Francisco, and Los Angeles long have been among the cities that defined the American urban experience. But today, families with children seem to be settling instead in small, relatively inexpensive metropolitan areas, such as Fayetteville in Arkansas and Missouri; Cape Coral and Melbourne in Florida; Columbia, South Carolina; Colorado Springs; and Boise. They are also moving to less celebrated middle-sized metropolitan areas, such as Austin, Raleigh, San Antonio and Atlanta.

    Traditional cities will continue to attract many of our brightest and most capable citizens, particularly among the young and childless. But our evidence indicates strongly that, for the most part, families today are heading away from the most elite, celebrated cities, and towards less expensive cities and the suburban periphery.

    Download the full report (pdf).

  • The End of Localism

    This could be how our experiment with grassroots democracy finally ends. World leaders—the super-rich, their pet nonprofits, their media boosters, and their allies in the global apparat—gather in Paris to hammer out a deal to transform the planet, and our lives. No one asks much about what the states and the communities, the electorate, or even Congress, thinks of the arrangement. The executive now presumes to rule on these issues.

    For many of the world’s leading countries—China, Russia, Saudi Arabia—such top-down edicts are fine and dandy, particularly since their supreme leaders won’t have to adhere to them if inconvenienced. But the desire for centralized control is also spreading among  the shrinking remnant of actual democracies, where political give and take is baked into the system.

    The will to power is unmistakable. California Gov. Jerry Brown, now posturing as  the aged philosopher-prince fresh from Paris, hails the “coercive power of the state” to make people live properly by his lights. California’s high electricity prices, regulation-driven spikes in home values, and the highest energy prices in the continental United States, may be a bane for middle- and working-class families, but are sold as a wonderful achievement among our presumptive masters.

    The Authoritarian Impulse

    Under President Obama, rule by decree has become commonplace, with federal edicts dictating policies on everything from immigration and labor laws to climate change. No modern leader since Nixon has been so bold in trying to consolidate power. But the current president is also building on a trend: Since 1910 the federal government has doubled its share of government spending to 60 percent. Its share of GDP has now grown to the highest level since World War II.

    Today climate change has become the killer app for expanding state control, for example, helping Jerry Brown find  his inner Duce. But the authoritarian urge is hardly limited to climate-related issues. It can be seen on college campuses, where uniformity of belief is increasingly mandated. In Europe, the other democratic bastion, the continental bureaucracy now controls ever more of daily life on the continent. You don’t want thousands of Syrian refugees in your town, but the EU knows better. You will take them and like it, or be labeled a racist.

    Already the disconnect between the hoi polloi and the new bureaucratic master race has spawned a powerful blowback, as evidenced by the rise of rightist, even quasi-fascist parties throughout the old continent. The people at the top—including much of the business leadership—may like the idea of a central European master-state, but support for the EU is at record low. Increasingly Europeans want, at the very least, to dial down the centralization and bring back some control to the local level, and something of the primacy of traditional cultures and what are still perceived  as “European values.”

    In some ways, the extreme discontent in America—epitomized by the xenophobic Trump campaign—reflects a similar opposition to bureaucratic overreach. This conflict can be expected to grow as new federal initiatives—initiatives that seek, among other things, to enforce racial and class “balance” in neighborhoods and high-density housing in low-density suburbs—stomp on even the pretense that cities might have any control over their immediate environment. This policy is being adopted already in some regions, notably Minnesota, where planners now seek to change communities that are too white and affluent populations need to meet new goals of class and economic diversity.

    The Rule of the Wise-people

    Historically, advocacy for the rule of “betters” has been largely a prerogative of the right. Indeed the very basis of traditional conservativism—epitomized by the Tory ideal—was that society is best run by those with the greatest stake in its success, and by those who have been educated, nurtured, and otherwise prepared to rule over others with a sense of justice and enlightenment. In this century, the idea of handing power to a properly indoctrinated cadre also found radical expression in totalitarian ideologies such as communism, fascism, and national socialism.

    In contemporary North American and the EU, the ascendant controlling power comes from a new configuration of the cognitively superior, i.e., the academy, the mainstream media, and the entertainment and technology communities. This new centralist ruling class, unlike the Tories, relies not on tradition, Christianity, or social hierarchy to justify its actions, but worships instead at the altar of expertise and political correctness.

    Ironically this is occurring at a time when many progressives celebrates localism in terms of food and culture. Some even embrace localism as an economic development tool, an environmental win, and a form of resistance to ever greater centralized big-business control.

    Yet some of the same progressives who promote localism often simultaneously favor centralized control of everything from planning and zoning to education. They may want local music, wine, or song, but all communities then must conform in how they operate, are run, and developed. Advocates of strict land-use policies claim that traditional architecture and increased densities will enable us to once again enjoy the kind of “meaningful community” that supposedly cannot be achieved in conventional suburbs.

    In the process, long-standing local control is being squeezed out of existence. Ontario, California, Mayor pro-tem Alan Wapner notes that powers once reserved for localities, such as zoning and planning, are being systematically usurped by regulators from Sacramento and Washington. “They are basically dictating land use,” he says. “We just don’t matter that much.”

    The Road to Imperium

    As the Obama era grinds to its denouement, grassroots democracy, once favored by liberals, is losing its historic appeal to the left. Important progressive voices like Matt Yglesias now suggest that “democracy is doomed.” Other prominent progressives, such as American Prospect’s Robert Kuttner, see the more authoritarian model of China as successful while the U.S. and European political systems seem tired.

    Increasingly the call is not so much for a benevolent and charismatic dictator, but for an impaneled committee of experts to rule over our lives. Former Obama budget adviser Peter Orszag and Thomas Friedman argue openly that power should shift from naturally contentious elected bodies—subject to pressure from the lower orders—to credentialed “experts” operating in Washington, Brussels, or the United Nations.

    The new progressive mindset was laid out recently in an article in The Atlantic that openly called for the creation of a “technocracy” to determine energy, economic, and land-use policies. According to this article, mechanisms like the market or even technological change are simply not up to the challenge. Instead the entire world needs to be put on a “war footing” that forces compliance with the technocracy’s edicts. This includes a drive to impose energy austerity on analready fading middle class, limiting mundane pleasures like cheap air travel, cars, freeways, suburbs, and single-family housing.

    The vagaries of America’s political system have contributed to the left’s growing embrace of centralism. The Republican ascendency in virtually all states away from the coasts all but guarantees their control of most legislative branches. In contrast, the Democrat control of major cities, particularly along the coasts, and their ability to woo voters who come out only every four years, gives them a tremendous advantage on the presidential level.

    This creates the ideal preconditions for  what Ross Douthat accurately notes is a rising “Caesarism of the left” since the 2010 Republican congressional sweep. There is broad backing among liberals for President Obama’s tack of avoiding Congress through presidential decrees. Nor is this tendency likely to end soon. Hillary Clinton, whose husband’s success was in part derived from working with Republicans, is already stating her intention to go over Congress if they don’t go along with her ideas.

    My word to liberal friends: Think a bit about this embrace of  imperial presidential power if the person ruling from above was, say, Ted Cruz, Marco Rubio, or, worst of all, Donald Trump.

    Slouching towards Imperium

    The centralization of power reflects disturbing tendencies in our economic life. Despite all the hopes for a more distributed, less concentrated “new economy,” we appear to be moving ever more toward economic centralization on a massive scale. Indeed, after decades of losing market share to smaller firms, the share of GDP controlled by the Fortune 500 has risen from 58 percent of nominal GDP in 1994 to 73 percent in 2013. 

    Part of this is driven by the relentless growth of large financial institutions, the very folks who precipitated the financial crisis with their ill-advised speculations. They have taken advantage of new regulations to greatly increase their share of the financial market to an unprecedented 44 percent.

    This economic consolidation, and how it plays into centralization, is rarely recognized by Republicans, living in mortal fear of offending their cherished K Street collaborators. A powerful central state often rains money on well-connected capitalists who have flourished under state-dominated systems in places as varied as Venezuela and Iran. Similarly, a draconian climate regime certainly enhances the fortunes of  capitalists such as Elon Musk as well as other Silicon Valley and Wall Street supporters who seek to force consumers and businesses into purchasing expensive, often unreliable renewable power from favored wind and solar projects.

    The increasing power of the central state, in contrast, is the bane of small companies, who are far less well-positioned to deal with ever-increasingly regulation. Washington’s efforts to control financial activities proved a disaster for the country’s entrepreneurial economy, long dependent on small community banks for loans. Overall for the first time in recent memory (PDF), more businesses are being destroyed than created. Concurrently, if unsurprisingly, themiddle class is shrinking, and seeing its share of the economy steadily diminish.

    There are some alarming parallels between these developments and the last days of the Roman Republic. There, too, developed a similar tendency toward vicious partisanship and a growing concentration of wealth in a few hands. In Rome’s case, the old middle classes and yeoman farmers were gradually replaced by patricians with access to slave labor; in our society, cheap foreign labor has been perceived as doing much the same for our oligarchs. Much as in Rome, our republican virtues are also fading. Instead, society seems to require a sure hand, particularly if the central authorities decide to transform society in ways that the vast majority might not like (for example, essentially banning suburban development or gas-powered cars). It may take a strict nanny state, to paraphrase Mary Poppins, to make the bitter medicine go down.

    The Coming Conflict

    Yet there’s a problem with centralization: People don’t trust the very institutions that would be charged with carrying out their policies. Levels of trust for the dominant institutions like the federal government, Congress, the courts, big banks, media, and the academy are at historically low levels.

    Roughly half of all Americans, according to Gallup, now consider the federal government “an immediate threat to the rights and freedoms of ordinary citizens.” In 2003 only 30 percent of Americans felt that way. Even in my home state of California—now a mecca for ever-expanding government—large majorities favor transferring tax dollars out of Sacramento to the localities, according to a December Public Policy Institute of California poll.

    Critically this blowback is not among conservatives or exurbanites. Much of the strongest opposition to the federal and state planning regimes are in areas such as California’s Marin County, north of San Francisco, where residents have objected to densification schemes that, they maintain, would undermine the “the small-town, semi-rural, and rural character of their neighborhoods”—the very qualities that attracted them there in the first place.

    Similar attempts to enforce density on suburban population have also led to uproars in  blue bastions such as the northern Virgina suburbs, the famously progressive University of California at Davis, and hip Boulder, Colorado. The New York Times’s Tom Edsall notes that the federal Department of Housing and Urban Development’s dictates may have already shifted politics in affluent Westchester County, an early target of the social engineers seeking to enforce HUD policies, to the right.

    Some leading progressives, like Nation contributor and Bay Area activist Zelda Bronstein, attack the growth of regional governments, designated to force compliance with state and federal mandates, as fundamentally undemocratic, embracing “insular, peremptory style of decision making.” Even millennials, who have tended to the left, are skeptical about over-centralized government. A recentNational Journal poll showed that they, like most Americans, are not enamored of top-down solutions: Less than a third favor federal over locally-based solutions.

    Simply put, there is no huge appetite for ever expanding federal power among the majority of the populace. What is missing, outside of nihilistic opposition to all government, is a strong movement advocating for more authority in the hands of local communities, families, and volunteer organization. This does not necessarily mean a decline in environmental standards, since most people care most about the places where they and their families reside. Even with climate change, a carbon tax could be approved without adopting the California formula of ever more mega-regulations covering virtually every aspect of life.

    As Alexis de Tocqueville noted in the 1830s, the genius of this republic lies not in its central state, but in its dispersion, voluntary association, and ideological diversity. If we undermine the legacy of our federal structure to something more akin to that, say, of France or Russia, the United States could no longer play its historic role as a rare beacon of independence and self-government in a world increasingly dominated by various manifestations of centralized tyranny.

    This piece first appeared at The Daily Beast

    .

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Barack Obama Photo by Bigstock.

  • Seeing the West as Worse

    “Hey-hey, ho-ho, Western culture’s got to go.

    – Slogan from 1988 Stanford University protest led by Jesse Jackson.

    In the aftermath of San Bernardino and Paris massacres, our cognitive leaders – from President Obama on down – have warned Americans not to engage in what Hillary Clinton has described as “a clash of civilizations.” But you can’t have a real clash when one side – ours – seems compelled to demean its traditions and values.

    Leaders in America and Europe don’t want to confront Islamic fundamentalism, or other nasty manifestations of post-Western thinking, because they increasingly no longer believe in our own core values. At the same time, devoted to the climate issue, they are squandering our new energy revolution by attempting to “decarbonize,” essentially leaving the field and the financial windfall to our friends in Riyadh, Moscow, Tehran and Raqqa.

    Western ethos deconstructed

    As the great 15th century Arab historian Ibn Khaldun observed, societies that get rich also tend to get soft, both in the physical sense and in the head. Over the past two centuries, Western societies, propelled by the twin forces of technology and capitalist “animal spirits,” have created a diffusion of wealth unprecedented in world history. A massive middle class emerged, and the working class received valuable protections, not only in Europe and America, but throughout parts of the world, notably East Asia, which adopted at least some of the Western ethos.

    Read the entire piece at the Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Payton Chung from DCA, USA (Polar bear protestUploaded by AlbertHerring) [CC BY 2.0], via Wikimedia Commons

  • The New Masters of the Universe

    Every age produces its own brand of oligarchs – feudal lords, banking gnomes, captains of industry. Our age has its own incipient ruling class, the tech oligarchs.

    The ascendency of these new hegemons is barely complete, and could conceivably be slowed or even reversed. But the tidal wave of new wealth, and even greater influence, will not be easily turned back. Six of the world’s 20 richest people are from tech or related industries like media and entertainment. In America, the media-tech sector in 2014 accounted for five of the top wealthiest people. Not surprisingly, most self-made billionaires are either quite old (the Koch Brothers, the Waltons, Warren Buffett) or got rich the traditional way: they inherited it. In contrast, virtually all self-made billionaires under 40 are techies.

    The making of a new ruling class

    With their massive, and early, accumulated wealth, the tech oligarchs will dominate us long after the inheritors have financed the last art museum or endowed the newest hospital. Two decades from now, many tech oligarchs will still be young enough to be counting their billions and thinking up new ways to ‘disrupt’ our lives – for our own good, of course.

    This tech elite differs from the founding generation of Silicon Valley. The early leaders – Bob Packard, Bob Noyce, Andrew Grove, Jerry Sanders – tended to be centrist and pragmatic. After all, the early Valley was heavily subsidised by the military and NASA, and produced industrial products that faced enormous competition. They also managed vast organisations with large numbers of ordinary employees. Like other industrialists, they were concerned with low-cost power and water, reasonable labour regulation and the health of the overall manufacturing economy.

    This changed when a combination of keen Asian competition and Californian regulation gradually shifted the chip and computer manufacturers out of Silicon Valley, which has lost roughly 80,000 manufacturing jobs since 2000. The new Valley is predominately post-industrial. For example, only 30 of about 16,000 production workers for the iPod are based in the US.

    As Silicon Valley became software valley, tech firms no longer needed large numbers of semi-skilled workers and the network of small subcontractors to keep the industrial machine going. Those services, if needed, could be performed in India, China, Utah, Texas or North Carolina. ‘The job creation has changed’, notes long-time San Jose economic development official Leslie Parks. ‘We used to be the whole food chain and create all sorts of middle-class jobs. Now, increasingly, we don’t design the future – we just think about it. That makes some people rich, but not many.’

    What has made ‘the sovereigns of cyberspace’, to quote author Rebecca MacKinnon, so wealthy is precisely what made John D Rockefeller so rich: control of markets. Google, for example, accounts for over 60 per cent of search, while, alongside Apple, it control almost 90 per cent of the operating systems forsmartphones. Similarly, over half of American and Canadian computer users use Facebook, making it easily the world’s dominant social-media site.

    More important still, the tech oligarchs control portions of their companies that would make most oilmen or auto executives fantastically rich. Indeed, owners of only one energy-related firm, Koch Industries, have made it into the top 10 of the Forbes 400. The CEO and chairman of Exxon-Mobil, America’s largest oil company, Rex Tillerson, controls 0.04 per cent of Exxon stock, while Google’s Sergey Brin, Larry Page and Eric Schmidt control roughly two thirds of the company’s voting stock. Larry Ellison, the founder of Oracle, Bill Gates and Mark Zuckerberg also control outsized shares of their firms.

    These firms are now so rich that they resemble countries. Besides General Electric, a classic conglomerate, Apple, Microsoft, Cisco, Oracle and Google often have more dollars on hand than the US government. And their influence can be felt in every office, home and phone through intrusive software that provides a trove of personal data that would make the old KGB turn from red to green with envy. As Google’s Eric Schmidt put it: ‘We know where you are. We know where you’ve been. We can more or less know what you’re thinking about.’

    The politics of the intangible class

    The liberation from the constraints of the tangible economy has inflamed the ambitions of the oligarchs. ‘Politics for me is the most obvious area [to be disrupted by the web]’, suggests former Facebook president Sean Parker. The success with which social media assisted President Obama’s re-election effort offers clear support to Parker’s assertion.

    In allying with Obama, tech is moving in the opposite direction to much of the business community, particularly small business, which Gallup finds a hotbed of anti-Obama sentiment. Other traditional industries like oil and gas have also turned overwhelmingly to the right, as Obama has targeted them for their role in climate change. In 1990, energy firms gave out almost as much to Democrats as Republicans; in 2014 they gave over three times as much to the GOP.

    In contrast, the oligarchs, as they have become ever richer, are clearly moving leftwards. In 2000, the communications and electronics sector was basically even in its donations; by 2012, it was better than two to one Democratic. Microsoft, Apple and Google – not to mention entertainment companies – all overwhelmingly lean to the Democrats with their donations.

    The transformer and the disrupters

    There seems a natural affinity between President Obama, who sees himself as a force for transformation, and the tech oligarchs, who love ‘disruption’. Each shares a high estimate of their basic intelligence and foresight; it is an alliance of those who feel they should own and shape the future.

    ‘We need to run the experiment, to show what a society run by Silicon Valley looks like’, venture capitalist Chamath Palihapitiya recently argued. This effort could appeal to a public that tends to regard the tech firms as better than more mundane businesses or the government. Indeed, when Steve Jobs, a 0.000001 per center worth $7 billion, and rugged capitalist of the classic type, passed away, protesters openly mourned his demise.

    One critical PR advantage the tech firms enjoy is that most, with a notable exception of Amazon, don’t mistreat blue-collar workers, or unions, since they have few of either. This gets them a free pass from social-justice warriors unavailable to traditional firms. Andrew Carnegie and Henry Ford mostly exploited workers in Pittsburgh or Detroit, and paid a price; the exploitation of the oligarchs takes place far away in Chengdu, Guangzhou or India.

    This alliance with the Democrats will not fade after Obama leaves office. Obama has enlisted several tech giants – including venture capitalist John Doerr, LinkedIn billionaire Reid Hoffman and Sun Microsystems co-founder Vinod Khosla – to help plan out his no doubt lavish and highly political retirement. Many former Obama aides have gone to work for tech firms. Uber, for example, uses Obama campaign manager David Plouffe to lead its PR team, while other former officials have descended to other tech firms such as AirBnB, Google, Twitter and Amazon.

    What is the ideology of Silicon Valley?

    Silicon Valley may be progressive in its social or environmental positions, but it has little interest in class politics, an issue being pushed by Vermont Senator Bernie Sanders in the Democratic primaries. ‘They don’t like [Bernie] Sanders at all’, notes San Francisco-based researcher Greg Ferenstein, who has been polling internet company founders for an upcoming book. Sanders’ emphasis on income redistribution, protecting union privileges and pensions hardly reflects the views of the tech elite. ‘He’s an egalitarian liberal’, Ferenstein explains, ‘these people are tech liberals. Equality is a non-issue in Silicon Valley.’

    What are ‘tech liberals’? Ferenstein provides a picture of an unconscious elitism that runs through their worldview. Although their industry is overwhelmingly based in the San Francisco Peninsula’s suburban sprawl, the internet oligarchs, he claims, want ‘everyone’ to move to the urban centre, something not remotely practical for most middle- and working-class families. They also advocate for strict environmental laws and ever higher energy prices, which don’t threaten their lifestyles, but are often devastating to those below them.

    Yet there is a danger that the issue of inequality could eventually affect the tech industry’s PR. Unlike the earlier products, such as computers or semiconductors, the products the tech industry now develop have provided little of value to the rest of society, whether in terms of jobs (outside of the Bay Area) or boostingproductivity. The social-media industry has made the likes of Mark Zuckerberg fantastically wealthy, but it’s difficult to maintain it has improved living conditions for most Americans.

    At the same time, well-financed Valley ‘disruption’ can be seen as a threat to many businesses and individuals. These already include groups such as cab drivers, owners and workers at small hotels, realtors and travel agents, and newspaper scribblers, all of whom are being driven out of the middle class. The much-needed ‘sharing economy’ often offers these workers part-time employment without much in the way of benefits.

    Even in the tech industry itself, American workers find themselves increasingly replaced by imported foreign workers. Oligarchs such as Mark Zuckerberg are anxious to expand H1B and other ‘guest-worker programmes’ that bring in low-cost indentured tech workers to the Valley, as well as to IT departments across corporate America.

    Of course, this hardly makes the tech oligarchs unique – after all, capitalists have always sought out the cheapest source of labour, and understandably so. But it does mean that, in oligarchic America, where even getting a degree in computer science and software does not guarantee a bright future, the hip, PR-friendly ‘don’t be evil’ appearance of tech companies may soon be looking a little less cool.

    Techies on the green team

    Perhaps nothing separates the oligarchy from the rest of business than its support for Obama’s climate-change policies. Many industries see these policies as a direct threat to their very existence, but this means little to moguls, who can shift their energy needs to cheaper locales, such as the Pacific Northwest or the South. In California, such policies have less an impact on the temperate coast than in the less glamorous interior. As one recent study found, the summer electrical bills in rich, liberal and temperate Marin come to $250 monthly, while in impoverished, hotter Madera, the average is twice as high.

    Not that there’s anything cynical about the tech oligarchy’s commitment to green policies. It is entirely sincere – the oligarchs really do believe, as do many liberal, Democratic types, that they are fighting the good fight. But that doesn’t mitigate the effects of their worldview.

    Still, the oligarch’s energy politics are not entirely based on the greater good. ForSilicon Valley and Wall Street supporters, there are also some business opportunities in the assault on fossil fuels. Cash-rich firms like Google and Apple, and many high-tech financiers and venture capitalists, have invested in subsidised green energy firms. Some, like Elon Musk, exist largely as creatures of subsidies. Neither SolarCity nor Tesla would be so attractive, or might not even exist, without generous handouts.

    The brave new world of the oligarchs

    If we want to get some idea how an oligarch-dominated economy works, take a look at my adopted home state – of over 40 years – of California, the home of the most powerful oligarchs. The Golden State sees itself as the ‘brains’ of the tech culture and proof of the bountiful ingenuity of ‘the creative class’.

    Yet behind the media glitz, California is increasingly a bifurcated state, divided between a glamorous software- and media-based economy concentrated in certain coastal areas, and a declining, and increasingly impoverished, interior. Overall, nearly a quarter of Californians live in poverty, the highest percentage of any state, including Mississippi, and, according to a recent United Way study, close to one in three people are barely able to pay their bills.

    So how do the oligarchs make this work politically? One way is simply to make alliances – through contributions and media support – with politicians who are most hurt by California’s regulatory vice. This strategy is evident in the odd coupling of San Francisco hedge-fund billionaire, Tom Steyer, the biggest funder of climate-change hysteria, and his Latino sidekick, California Senator Kevin de Leon, who represents impoverished East Los Angeles.

    The new political configuration works in classic medieval fashion, with the rich providing the necessities for the poor, without providing them opportunity for upward mobility or the chance, God forbid, to buy a house in the outer suburbs. With the fading of California’s once powerful industrial economy – Los Angeles has lost much of its manufacturing base over the past decade – its working classes now must be mollified by symbolic measures, such as energy rebates, subsidised housing and the ever illusive chimera of ‘green jobs’.

    This ‘upstairs-downstairs’ California coalition could presage the country’s political future. Perhaps it’s best to think of it as a form of high-tech feudalism, in which the upper classes run the show, but bestow goodies on the struggling masses. This alliance will allow the present tech oligarchs to thrive without facing a populist challenge that could interfere with their profits and expansion into other markets.

    In the oligarchic era, the bottom line is an increasing concentration of power in ever fewer hands. Romantic notions that the high-tech era would be marked by a surge of small, independent companies are belied by the market domination of a few firms and their expansion into ever more business areas. Companies like Google begin to morph into conglomerates, or American versions of Japan’skeiretsu, with interests in such businesses as health, media and autonomous vehicles.

    Similar keiretsu are forming around companies such as Apple, Amazon and Facebook, which now can buy their way into what were once seen as unrelated markets. This is married to increased media power, which will allow them to set the agenda in coming decades. This is being accomplished both through the purchase of old media – the most important being the purchase by Amazon’s Jeff Bezos of the venerable Washington Post – or by new sites controlled by firms like Yahoo, the No1 news site in the US, with 110million monthly viewers, or Google’s news site with 65,000,000 users.

    The intrusion of tech firms into media is likely to become even more pervasive as the millennial generation grows up and the older cohorts begin to die off. Among those over 50, only 15 per cent, according to a Pew report, get their news over the internet; among those under 30, the number rises to 65 per cent.

    Ultimately the ambitions of the oligarchs are boundless. Firms like Amazon CEO Jeff Bezos’ Blue Origin, and Elon Musk’s Space X, seek to lead the world in space exploration. If NASA continues to retreat from many areas of space exploration, it is likely that, in the future, the heavens may end up belonging to the oligarchs as well.

    When historians write the history of this age, their attention likely will focus on the rise of these oligarchies. They already control California, with its unparalleled creative and technical prowess, as well as the dominant cultural power centre in the English-speaking world. Tomorrow the new oligarchs will be looking to consolidate their power in Washington. And the day after that, maybe the world and galaxy as well.

    This piece originally appeared at Spiked.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of The City: A Global History and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Official White House Photo by Pete Souza.

  • The Fall of Rahm Emanuel

    Rahm Emanuel, a man of obvious talent, drive, and leadership capacity, should have been an ideal person to run a big city like Chicago. Unfortunately, because of his stubborn unwillingness to admit and compensate for his flaws, that was not to be.  After barely limping across the finish line in his re-election bid and tamping down the fallout from Moody’s downgrading the city’s debt to junk status, Emanuel has now been rocked by a truly huge scandal. The Chicago Police Department shot 17 year old Laquan McDonald 16 times, killing him, then did not release a video of it for over a year – including sitting on it during the entire election season. And that’s just the start of it.

    My latest piece in City Journal, The Fall of Rahm Emanuel, looks at Rahm’s tragic trajectory:

    Emanuel’s leadership style came with fatal flaws. A political streetfighter by inclination, he lacks an operational orientation. He didn’t appear to grasp the scope of the city’s financial problems until four years after he was first elected, when Chicago’s bond rating was cut to junk. His infrastructure trust fizzled. The schools went from bad to worse, with his first CPS leader forced out and his secondpleading guilty to corruption. He didn’t get it that Chicago’s police department hadn’t been fundamentally reformed the way New York’s and Los Angeles’s had been.

    Emanuel’s governing style has been all tactics, no strategy. He’ll pick up the phone to twist the arm of a CEO or fight to win the day’s media cycle. But what’s his vision for the city? He has no idea how to make Chicago as a whole work over the long term. Nobody is great at everything, but Emanuel’s arrogance seemingly won’t allow him to address his own shortcomings. Famously vindictive, he alienated the local press and others, turning those who might have helped him into enemies. He also brought a Washington-style spin-control mindset to Chicago. In Washington, an army of apparatchiks and a compliant media lets politicians like Obama create a reality bubble. In national politics, perception is often is reality. But in local government, reality is reality. The West Side isn’t Benghazi. The people who live in Chicago can walk out their front doors and see for themselves what’s going on.

    Click through to read the whole thing.

    Aaron M. Renn is a senior fellow at the Manhattan Institute and a Contributing Editor at City Journal. He writes at The Urbanophile, where this piece originally appeared.

    Photo: Chicago Mayor Rahm Emanuel, left, greets U.S. Defense Secretary Leon E. Panetta upon his arrival at a CEO roundtable in Chicago, May 20, 2012, courtesy of the Department of Defense.

  • Can GOP Fatten Up Around the Middle?

    At a recent breakfast in Washington, D.C., a rising young Republican senator explained the divisions in his party in a particularly succinct manner: a conflict between the donor base and the GOP rank-in-file.

    “The donor class,” this senator told me, “really cares about one thing: lower taxes. Most in the party don’t see this as the most crucial issue.”

    Although some donors care about other issues, including Israel and, sometimes, social issues, the big money in the party is focused on reducing tax burdens. After all, if you are an investment bank, pharmaceutical firm or oil company, your concerns involve finding ways to avoid, or at least slow down, the taxman.

    In the past, many grass-roots Republicans may have shared this concern, but other issues – like a weak economy, rising inequality and crime, as well as terrorism – increasingly may become more important. The very nature of the current recovery, beneficial to the donor class but not so much for the vast majority of Americans, works against the traditional antitax focus of the GOP. Does anyone on Main Street believe lower capital-gains taxes, which would preserve more of the wealth of hedge funders, corporate hegemons and venture capitalists, helps them?

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, and a member of the editorial board of the Orange County Register. He is also executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is also author of 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 (Donald Trump) [CC BY-SA 2.0], via Wikimedia Commons