New Geography

Category: Politics

  • How Fossil-Fuel Democrats Became An Endangered Species

    In an election pivoting on jobs, energy could be the issue that comes back to haunt Barack Obama and the Democratic Party as the cultural and ideological schism between energy-producing Republican states and energy-dependent Democratic ones widens.

    As the economy has sputtered since 2008, conventional energy has emerged as one of the few robust sources of high-paying work, adding roughly half a million jobs since 2007 as new technologies and changing market conditions have opened up a vast new supply of exploitable domestic reserves. This is good news for Mitt Romney: nine of the ten states that rely most heavily on the sector for jobs are solidly behind him. (Colorado, where polls show Obama with a narrow lead, is the one exception).

    President Obama’s heavy-handed regulation of the booming old-energy economy—the moratorium on offshore drilling following the BP spoil, the decision to block the Keystone XL Pipeline, and the prospect of a fracking ban—and his embrace of green-energy policies has played well in the solidly-Democratic post-industrial coastal economies that he also depends on for fund-raising. But it’s left him with few friends in the energy belt that spans the Great Plains, the Gulf Coast, Appalachia and now some parts of the old rustbelt, despite his election-year claims of an “all-of-the-above” energy policy.

    It’s a far cry from Bill Clinton, whose close ties with Great Plains and Gulf Coast Democrats and energy producers there helped him twice carry Louisiana, Kentucky and West Virginia—all states that appear to be solidly behind Romney this year.

    Today, Democratic senators in regions that depend on fossil fuels are becoming an endangered species. Over the past two years, Virginia’s Jim Webb and Byron Dorgan and Kent Conrad, both from booming North Dakota, have announced their retirement or retired, while Montana’s Jon Tester has distanced himself from the president as he faces a difficult re-election fight. And that diminishing presence in turn means less intra-party resistance to any potential second-term plans to cut the burgeoning fossil-fuel business to size.

    The administration’s hostility to the dirty business of energy, and the sector’s fear of new bans or regulations in a second Obama term that would gut the industry were perhaps best captured by the then-EPA administrator who claimed Administration policy was to “crucify” fossil fuel.

    Yet as Obama pursues a 50-percent-plus-one re-election strategy reminiscent of President Bush in 2004, his energy approach has been embraced by his core constituents, particularly the public-sector union workers and urbanized “creative-class” members. This is particularly true in the coastal enclaves like New York and California that import much of their energy (and in California’s case in particular has declined to exploit its own considerable reserves). Sixty-percent of the electricity in Los Angeles, a key bastion of Obama support, comes from coal-fired plants in Utah and Arizona; much of the natural gas that provides nearly half of the power for California’s grid is imported. While Pennsylvania and Ohio have exploited their large shale reserves that have become vastly valuable in recent year thanks to new extraction techniques and shifting energy prices, New York State has yet to follow suit, even as New York City lacks the supply to match peak summer demand, forcing it to depend on an aging nuclear power plant at Indian Point that’s years overdue to close.

    President Barack Obama defends his energy agenda during his visit to oil and gas production fields located on federal lands outside of Maljamar, N.M., Wednesday, March, 21, 2012. (Pablo Martinez Monsivais / AP Photo)

    If anything, the pressure from environmental activists , many of them well-heeled and living far removed from power sources and the jobs they create, is for Obama to go even further. A few rich donors from the green lobby complain the President has not been environmentally correct enough; Mother Jones actually asked if Obama has been “morphing into Dick Cheney” on energy issues.

    But for the most part, the coasts are on board with Obama’s energy policy. Silicon Valley and Wall Street have invested heavily in the renewable industries favored and frequently propped up by the administration, putting their money where Obama’s mouth is. Silicon Valley hegemons like venture capitalist John Doerr and Wall Street giants like Goldman  Sachs regard the green energy business as a profitable, state-supported way to grow their profits. One disgusted  venture investor described the investors in the heavily subsidized green game as “venture porkulists.”

    These investments are now critical to many powerful tech firms, who increasingly have little domestic involvement in the manufacturing businesses that was central to a prior generation of Silicon Valley titans. Google alone has invested more than a billion dollars in the green-energy sector, as the valley’s new dominant clique of venture capitalists and tech executives donate at record levels to the president’s re-election.

    Nowhere is the element of choice inherent in energy policy more evident than in California, home to five of the nation’s twelve largest oil fields and energy reserves equal to those of Nigeria, the world’s tenth-largest producer. As high-paying energy jobs swell payrolls in the Great Plains, the Intermountain West and parts of the Gulf, the Golden State has double-digit unemployment, a collapsed inland economy and a series of bankrupt municipalities. Amidst a great national energy boom, California’s energy production has remained stunted even as the state’s draconian “renewable” energy mandates are slated to drive up its already high electricity rates. The state’s high cost of energy has impacted industry:  despite its vast human and natural resources, the Golden State, with 12 percent of the nation’s population received barely 2 percent of the country’s manufacturing expansions last year.

    Such inattention to California’s resources may be  popular in wealthy precincts of Silicon Valley, San Francisco and west Los Angeles, but the state’s green approach has helped place traditionally manufacturing-oriented communities such as Oakland, east Los Angeles, San Bernardino and Stockton in deep distress. Despite central California’s vast deposits of oil and gas, unemployment rates in some oil-rich areas there are over 15 and sometimes even 20 percent. 

    As economic forecaster Bill Watkins recently told an audience in hard-hit Santa Maria: “If you were in Texas, you’d be rich.”

    Meanwhile  the fossil-fuel energy producers, related chemical manufacturers  and financiers who are getting rich, from the Koch Brothers to Chesapeake Energy and Arch Coal, have been investing in Romney and the super-PACs supporting him.

    Much of the money they’re pouring in will likely be spent persuading voters in the four crucial energy states –long-time producers New Mexico and Colorado and emergent natural gas producers Ohio and Pennsylvania—that will be up for grabs in November. Colorado has generated more than 20,000 while new energy jobs since 2000, third highest in the nation, while Ohio and Pennsylvania combined have created 25,000 new energy jobs in that span—and that’s not counting the services those largely  well-paid workers demand or the new manufacturing jobs making pipes and compressors the industry creates. What all four contested states have in common is that their energy sectors are pitted against powerful competing interests, including true-blue urban constituents, and tourism and technology sectors that employ workers and industries more concerned with the local environment than with energy-driven growth.Still, a boom is a boom, and President Obama is doing his best to claim credit for the huge surge in oil and gas production under his watch, although the increase has been almost completely on private and state lands outside his reach. Production on federal lands has actually dropped. Yet his “all of the above” rhetoric comes off as more evenhanded and substantial than the drill- baby-drill GOP set.

    Romney, though, can point to a series of Obama decisions and priorities—including the painfully slow resumption of Gulf Shore oil operations after the BP spill, the effective veto of the Keystone XL pipeline, and proposed EPA greenhouse gas restrictions—as mortal threats to the American energy boom. He can also contrast the economic rise of energy-friendly Texas with the troubles of hyper-green California.

    Whether Romney, far from a master communicator, is savvy and bold enough to stick the point may prove decisive in November.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    This piece originally appeared in The Daily Beast.

    Oil well photo by BigStockPhoto.com.

  • High Speed Rail Advocates Discredit Their Cause – Again

    Is there any high speed rail boondoggle big enough to make rail transport advocates reject it?  Sadly, for all too many of them, the answer is No, as two recent developments make clear.

    The first is in California, where the state continues to press forward on a high speed rail plan for the state that could cost anywhere from $68 billion to $100 billion. Voters had previously approved $10 billion in bonds for the project, but as the state’s economy and finances have continued to sour – including multiple major cities going bankrupt – the polls have turned against it, and with good reason. The state faces the prospect of already enacted education cutbacks if Gov. Jerry Brown’s tax increase proposal in not approved in a vote this fall.  Other painful service cuts loom. Voters are rightly asking themselves if now is the time to be borrowing public money for very expensive, speculative infrastructure. 

    Equally, many of the much cited overseas examples of high-speed rail seem, well, to be off the tracks.    China’s rail system has serious safety problems, for example. And developing the most extensive high speed rail system in Europe hasn’t stopped Spain from seeing 50% youth unemployment, a 3 percentage point increase in the VAT tax, and a humiliating bailout from the rest of the EU.

    Nevertheless, the California assembly recently voted to go full speed head on its high speed rail plans. As part of an overall $8 billion rail spending package, the state is borrowing $2.6 billion to complement $3.2 billion in federal funds left over from the stimulus (shovel ready???) to build a starter segment of the line linking Bakersfield and Madera through the Central Valley. This is the easiest segment on which to build – though legal action is likely to delay construction – but doesn’t do anything to link the state’s huge population centers around LA and the Bay Area. With no more significant federal funds likely to be forthcoming, and the state’s finances a wreck, this segment risks becoming an embarrassing white elephant, or, as critics call it, “a train to nowhere”.

    After this vote it came to light that respected French high speed rail operator SNCF had approached California officials, private funding in hand, with a preliminary offer to build the LA-SF link themselves on a better and cheaper alignment along I-5 that would cost only $38 billion. But this was rejected by the state. The Times account suggests this rejection came about due to a combination of a political preference for the inefficient Central Valley segment and the clout of Parsons Brinckerhoff, the lead contractor.  Some commentators have referred to this revelation as a “bombshell.”

    Despite management misstep after management deception, rail advocates around the country cheered California’s decision to build the Central Valley segment. Jerry Brown, with not much to show for his reprise as Governor, is excited of course. Secretary of Transportation Ray LaHood called it a “big win.”  America 2050 (an offshoot of the Regional Plan Association of New York), “commended” the state for “taking a big step forward.”  Streetsblog called it a “major victory.”  While I respect what these organizations do in other contexts, this high speed rail vote is not a major victory, but a major defeat for common sense.

    But apparently not willing to let California take the prize in the rail boondoggle category without a fight, Amtrak shortly thereafter issued a “vision” for rail in the Northeast Corridor that would provide faster service between Boston and Washington, DC – at a cost of $151 billion. Strange as it sounds, some commentators actually lauded Amtrak for reducing costs since the previous plan was $169 billion.  The Brookings Institution was measured in its reaction to the plan, but managed to describe it as “more rational.”   With Republicans seemingly safely in charge of the House for now, and large federal deficits projected for the mid-term future, $151 billion for Amtrak seems purest fantasy.

    These developments are unfortunate because high speed rail could play an important role in US transportation, particularly in the Northeast. But that’s unlikely to happen because of the indiscriminate way establishment advocates have supported anything with the “high speed rail” label attached, ranging from $2 billion, 110 MPH peak speed Toonerville Trolleys in Illinois that barely beat Megabus in terms of journey time to the California rail boondoggle, regardless of merit. All they know that if it claims to be high speed rail, they are in favor of it.

    There are other people who take a more serious view. Unfortunately, they tend to be outsiders with little influence.  For example, Alon Levy suggested a set of near term, incremental Northeast Corridor improvements that might cost 90% less than Amtrak’s plan.

    $8 billion in stimulus dollars have gone to purchase us nothing of any real significance in terms of rail infrastructure. That money, invested wisely in high priority projects in the Northeast Corridor, could have made a big difference and started building a real demonstrated case for high speed rail investment in America. Unfortunately, the way high speed rail has been botched by its advocates, all the money we’ve spent on it has accomplished just the opposite. If California’s Central Valley segment is built and the complete line is never finished, it will likely discredit high speed rail in America for the long term.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool.

    CA route map by Wikipedia user CountZ.

  • China and the Future of Hong Kong

    Last week Hong Kong’s new leader Leung Chun-ying was sworn into office by Chinese President Hu Jintao. The ceremony coincided with the 15th anniversary of the British handover of Hong Kong to China so there was plenty of rhetoric about ‘strengthening ties with the motherland’. Yet not far from the ceremony, tens of thousands of Hong Kong citizens marched in protest showing discontent with growing inequality and what they perceive as Beijing’s increasing assault on the territory.

    The relationship between Hong Kong and mainland China is complex. Beijing for the most part has kept its promise to uphold the ‘one country, two systems’ mandate. Officially, Hong Kong is considered a ‘Special Administrative Region’ (SAR), which means that it is treated as a separate country from an immigration standpoint and continues to circulate its own currency, the Hong Kong dollar. Hong Kong also retains an independent legal and judicial system inherited from the previous British rulers.

    Most importantly, Hong Kong has avoided the draconian media censorship common on the mainland. A free press is consistent with its reputation as a global center of banking and commerce. Hong Kong’s ease of trade and doing business frequently leads it to being named one of the world’s freest economies.

    So if Beijing continues to hold up its end of the deal, why do so many Hong Kong residents march in protest? The relationship is more nuanced than it appears on the surface. Politically, Hong Kong residents do not have the freedom to elect their leader (CY Leung was appointed by a 1,200-person electoral college made up primarily of pro-China business leaders), although democratic elections are set to commence in the next five years. Underlying this frustration is what Hong Kong residents see as an infiltration of growing mainland influence on the city.

    On the ground, Hong Kong experienced a huge increase in mainland tourists to the city since the handover. Hong Kong doesn’t have the same high tax rate on imported goods that mainland China does, so mainlanders flock to the city primarily for shopping, hunting for bargains on electronics and luxury fashion brands. It is not uncommon to see long queues of mainland tourists in front of shops of famous fashion brands like Gucci, D&G or Prada. The droves of mainland shoppers spending money in Hong Kong are great for the local economy, but many locals decry the constant flow of tourists as invading ‘locusts’.

    Yet more significant than what is happening on the ground is what is taking place high above in the sky. The phenomenon of wealthy mainlanders purchasing real estate in the city has driven   housing prices to astronomical levels, approaching the market just before the Asian Financial Crisis of 1997. For well-off Chinese mainlanders, Hong Kong real estate is seen as a safer long-term investment than China’s still somewhat risky real estate market and unpredictable stock market. A severely limited land supply coupled with the fact that a handful of powerful real estate oligarchs control the market for new development means that prices will probably stay high barring another economic crisis.

    Land-use policy is perhaps the most critical factor in determining both the future of Hong Kong and the mainland. As anyone who has been to the city can attest to, Hong Kong has some of the best infrastructure in the world, including a first-class international airport, extensive rail system and a booming seaport. Much of that infrastructure comes from the city’s land-auctioning system, which is the government’s primary source of revenue. This is also what helps keeps taxes low.

    Furthermore, unlike in the U.S., where infrastructure is traditionally financed publicly, Hong Kong’s infrastructure is increasingly built with private funds. For instance, the city’s Mass Transit Railway (MTR) Corporation, founded as a public entity, went fully private in 2000 and is traded on the Hong Kong’s stock exchange. In addition to operating and maintaining the city’s existing rail system, MTR Corporation is responsible for building new lines. What makes MTR Corporation different from most other transit authorities is that its primary earnings do not come from passenger ticket sales but from developing the land on top of and around its metro stations.

    Cheung Kong Holdings, led by Hong Kong’s richest man Li Ka-shing, is not only one of the city’s largest property developers, its business interests also include Hutchinson Port Holdings (a port operator that handles 13% of the world’s container traffic) and Hutchinson Telecommunications Limited (which builds and operates mobile phone networks). Sun Hung Kai, another powerful Hong Kong property developer also owns stakes in logistics and telecommunications businesses (although its founders, the Kwok brothers, were recently arrested on corruption charges).

    The mode of urban development in mainland Chinese cities is heavily influenced by Hong Kong. Yet instead of powerful corporations, State-Owned Enterprises (SOE), large entities owned by the government, dominate urban development related businesses. China’s land auctioning system is far from perfect, with well-documented instances of corrupt land seizures and the unfair advantages government backed SOEs have in the bidding process over private developers. But with virtually no property taxes in mainland cities, land sales remain the primary source of revenues for local governments to support infrastructure development.

    There is growing evidence that suggests China plans to alter the direction of its development model in the coming years by consolidating and privatizing its SOEs. Already, Hong Kong property developers are active in the mainland real estate market with Chinese companies eager to learn from their expertise. The cozy relationship between Hong Kong developers and mainland SOEs is a cause for concern by Hong Kong citizens, as they see their local developers as more interested in appeasing Beijing authorities than providing affordable housing for its own citizens.

    Yet this is inevitable. The city of 7 million cannot expect to forever be completely independent of a country of 1.3 billion to which it is now irrevocably attached. This is true even in spite of Hong Kong’s role as an international center of trade.

    Throughout history, Chinese culture survived through its sheer mass and cultural osmosis. When CY Leung gave his inaugural speech last week, it was in Standard Mandarin, the official language of China. Although the citizens of Hong Kong are also Chinese, their official language is Cantonese, a completely different and not mutually intelligible dialect. Leung’s move was seen as a slight to the people he was chosen to serve, yet given who he has to report to in Beijing, it made perfect sense.

    Adam Nathaniel Mayer is an architectural design professional from California. In addition to his job designing buildings he writes the China Urban Development Blog.

    Follow him on Twitter: AdamNMayer

    Hong Kong photo by BighStockphoto.com

  • Coney Island’s Invisible Towers

    When crowds thronged Coney Island for the annual Nathan’s hot dog eating contest on July 4th, they found a boardwalk amusement strip that was, for the umpteenth year in a row, undergoing a summer of change and transition.

    There is the new: go-carts and a new roller coaster for the "Scream Zone" that the Luna Park amusement park added last summer; and the start of a new pavilion alongside the Parachute Jump, where the old B&B Carousell (second "l" now enshrined as a historic typo), relegated to storage since 2005 and painstakingly restored at city expense, will once again whirl next spring.

    There is the disappeared and the disappearing: Henderson’s Music Hall, where Harpo Marx made his stage debut, was demolished two winters ago by landowner Thor Equities; this spring, it was replaced by a nondescript one-story structure that, lacking tenants, was instantly boarded up with plywood. And barring an unforeseen reprieve, this will be the final summer for both Denny’s ice cream and the Eldorado bumper cars, each of which is expected to see its Surf Avenue storefront razed for new construction — or at least occupied by new businesses — in the near future.

    It’s another step in the remaking of the Brooklyn beachfront that began in 2003, when the city launched a rezoning process to transform the diminished yet still-popular summer destination into what it hoped would be a year-round hot spot for both residents and entertainment-seekers. In the years since, what seemed like the beach’s inexorable slow slide into decay — a bathhouse burned down one decade, a derelict rollercoaster razed the next —turned into a whirlwind of change, as developers and longtime neighborhood property owners alike began smelling greenbacks in the air, and the 46-year-old Astroland amusement park and many longtime boardwalk businesses were pushed out in the rush to make way for promised glitzier attractions.

    Yet amidst all the noisy mermaid-filled debates that accompanied the rezoning battle, it’s been easy to forget that the amusement district proper — a beachfront strip of rides, carny games and skeeball parlors that over the decades has shrunk to a relict dozen or so acres — was never the main target of the city’s rezoning efforts. Though the storefronts along Surf (including the homes of Denny’s and Eldorado) were slated for high-rise hotels on the city’s rezoning renderings, much of the focus of the Coney Island Development Corporation (spun off by the city Economic Development Corporation in 2003 to oversee redevelopment plans) was to the west, where the city’s stated intent was to bring mixed-use housing and retail towers to the vacant lots that have littered Surf Avenue since they were cleared for urban renewal in the 1960s. Click here to see a map of the rezoned area.

    "It’s a neighborhood with a significant amount of poverty, very few jobs and lots of abandoned lots," said city Economic Development Corporation (EDC) president Seth Pinsky after the rezoning was approved by the City Council in 2009. The hope at the time was that by dropping some high-end residents into Coney Island, as well as new storefronts along Surf Avenue that could host restaurants, movie theaters and other year-round attractions, local residents could finally have access to more than the seasonal jobs that have traditionally accompanied the summer beach season.

    Three years later, though, there is little sign of the condo messiah arriving anytime soon. A single apartment building on the boardwalk at West 32nd Street was begun two winters ago, but today remains unfinished. Nearby, Coney Island Commons, a mixed-income coop complex that will include a new YMCA-run community center, has blown past its original summer 2009 target completion date — thanks to delays in finalizing financing and community agreements, according to developer Jerome Kretchmer — and is now slated for an opening in 2013.

    Among the actual lots rezoned three years ago, meanwhile, Thor’s plywood-bedecked single-story building is the only sign of new construction. In particular, the "Coney West" lots just west of the Brooklyn Cyclones stadium, which in city renderings appeared as modern glass-and-brick towers fronting tree-lined boulevards, remain much as they have for decades: empty expanses of dirt and gravel, used as ad-hoc parking lots if anything at all.

    Some of this, no doubt, can be blamed on the collapse of the housing bubble, which struck just as the city put the finishing touches on its rezoning plan. Yet even if demand for beachfront condos rebounded tomorrow, many longtime residents warn that it would still take years, if not decades, of sewer and electrical upgrades before Bloomberg’s residential dreams could become reality.

    "Before they put up one major building, they basically have to rip up the entire peninsula, and put in stormwater lines and sewage lines," says Ida Sanoff, a former Community Board 13 member who has become the beachfront’s most dedicated environmental watchdog.

    It’s an investment that the city says it’s willing to make — eventually: The EDC is now openly talking about a "30-year plan" for redevelopment. The price tag, according to city figures, could run close to half a billion dollars, making it one of the most expensive city redevelopment projects of the Bloomberg era. And even then, it’s an expensive gamble by the city that the promised construction will ever arrive.

    * * * *

    If Thor Equities’ Joe Sitt was the developer that Coney fans loved to hate — the man who evicted Astroland, who threatened to build high-rise apartment buildings and hotels right on the boardwalk — then Taconic Investment Partners were the designated good guys. With none of Sitt’s bluster, the real estate investment firm quietly bought up several blocks of vacant lots along Surf Avenue — one, bought by Sitt for $13 million, cost Taconic $90 million less than a year later — and announced plans to work with the city to bring in mixed-use condo towers at a respectful distance from the amusement zone.

    Taconic officials were amiable and readily accessible at the time, but have since all but disappeared from public view; company officials did not return numerous calls and emails for this article, and its websitenotes only that "Taconic is in the process of evaluating the economics of a planned development for some or all of our holdings."

    The city, meanwhile, is moving slowly on the infrastructure upgrades that it will take to support the new buildings, when and if they arrive. The first phase — a set of new storm sewers and ungraded sanitary pipes along W. 15th St. and a short stretch of Surf Avenue — is currently in the design phase, with work set to start in the fall and a target completion date of 2015. Two more phases will expand into surrounding blocks, but not until 2022. A total of $140 million has been budgeted for new sewer and water lines between West 12th Street and West 21st Street, according to EDC.

    But the peninsula’s infrastructure needs, according to longtime locals, go far beyond the few square blocks around the Taconic properties. "Everything south of Surf Ave., there’s no storm water lines in," says Sanoff. "You’re going to have a lot of paved surfaces, and where is all that stormwater going to go?" Already, she says, "If you walk the beach here after a heavy rain, it’s just littered with poop bags" that dog owners have thrown into the sewers — and which have popped back up when stormwater backs up.

    "The whole peninsula is in need of [infrastructure work]," says CB13 district manager Chuck Reichenthal. "You can’t put up highrise hotels, buildings, or anything else, when what exists now has flooding problems."

    Brian Gotlieb, who served as chair of Community Board 13 from 2002 to 2006, says he expects that the city would have moved more quickly on sewer upgrades if developers were champing at the bit to put shovels in the ground. Even so, he worries that sewers are only the tip of the iceberg when it comes to needed infrastructure upgrades. "Coney Island has always had problems with brownouts and blackouts," he says, predicting a need for major electrical upgrades. (EDC says these will be handled by ConEd on an as-needed basis.) And then there’s the eventual demand for schools to educate the children of all those condo dwellers if and when they arrive.

    What the total cost would be, no one can say. The city Independent Budget Office projects a total city expense of $277 million on land acquisition, park and boardwalk reconstruction, and other neighborhood capital projects through 2013; add in the $140 million budgeted by the Department of Environmental Protection for sewer work, and the total price tag is at $417 million. (If you include the $39 million Keyspan Park and $250 million Stillwell Avenue subway terminal — first put in motion when Rudy Giuliani was touting Coney Island and as the next Times Square — total public expense on the rebuilding of Coney rises to more than $700 million.) And that’s not even factoring in any increased costs of protecting a newly developed beachfront from the ravages of climate change: In 2007, Rohit Aggarwala, who was then running Mayor Bloomberg’s PlaNYC project to plan for the city’s future growth, called a five-inch rise in water level by 2030 "a moderate scenario"; a University of Arizona sea-level mapping toolprojects that in a worst-case scenario, Coney Island could be reduced to three disconnected islands by the end of this century. (The rezoning does require that local streets be raised to guard against sea-level rise, according to EDC, but specific plans—and budgets—will be worked out only "as sites are developed.")

    This is par for the course in city redevelopment efforts, says Hunter College planning professor Tom Angotti. "I don’t know of anyone who systematically calculates costs in New York City," he says. "The infrastructure that does get built is a very pragmatic response to either developer needs or community opposition." In other cities, he notes, "when you have a significant negative impact, then there’s a whole discussion of whether new infrastructure is needed — here, it doesn’t get discussed."

    * * * *

    If there’s an upside to the city’s deliberate pace, it’s that if the market for Coney condos never recovers to pre-crash expectations, then taxpayers save the hundreds of millions of dollars it would take to build the infrastructure to support the influx of new inhabitants. (The $95 million the city spent to relieve Sitt of his stretch of the amusement district, though, is a sunk cost.) The downside is that then the last ten years of upheaval on Coney Island has failed to achieve its primary goal.

    It would also mean the death of hopes that the rezoning drama will ultimately produce jobs for the impoverished blocks to the west, a cul-de-sac known as the West End that sports some of the highest unemployment rates in the city. During the rezoning battle, a coalition calling itself Coney Island CLEAR, made up of representatives of several city unions and a handful of locals (most prominently Rev. Connis Mobley of the West End’s United Community Baptist Church), lobbied for job guarantees for local residents as part of the rezoning.

    Gotlieb, who served on CLEAR’s board, says that the hope was that new development would bring not just jobs — which in Brooklyn as often as not employ people outside the immediate neighborhood— but training opportunities to help residents plan for careers. And while the CIDC has helped some people get building certifications, he says, so far there’s been little to build. "Once the economy took a turn that it did, nobody was doing a heck of a lot."

    For now, the city is publicly professing patience, with an EDC spokesperson saying that an timetable for the Taconic properties "is determined by the private developer," adding, "We’re less than three years into a 30-year redevelopment plan and significant progress has already been made. We’re confident the 2009 rezoning lays out a practical pathway going forward."

    Looked at another way, though, this round of predictions of a reborn Coney Island has been going on for almost a decade, and its biggest booster is only a year and a half from departing City Hall. If the long history of failed plans for the neighborhood — from the post-war urban renewal plans that first created today’s vacant lots to Ed Koch’s late-’70s promises of beachfront casinos — tells us anything, it’s that in Coney Island, nothing is a sure bet.

    This piece originally appeared at The Brooklyn Bureau.

    Photo By Pearl Gabel.

  • U.S. Desperately Needs a Strategy to Attract the Right Skilled Immigrants

    President Obama’s recent “do it myself” immigration reform plan, predictably dissed by conservatives and nativists, reveals just how clueless the nation’s leaders are about demographics. Monday’s Supreme Court ruling on Arizona’s immigration crackdown also broke down along predictable lines, with both parties claiming ideological victories.

    Yet the heated debates are missing the reality of immigration and its role in America’s future. In reality America needs more immigrants, but with a somewhat different mix.

    Rather than an issue of “values” or political sentiment, we need to look at immigration as a matter of arbitrage, a process by which rapidly aging countries bid for the skills and energies of newcomers to keep their economies afloat.

    Nowhere is this immigration arbitrage clearer than in the world’s most rapidly aging region, Europe. By 2050 the workforce there is expected to decline by as much as 25%. Yet this diminishing resource is now increasingly on the march as young Greeks, Italians and Portuguese flee to stronger economies in Europe’s Nordic belt and elsewhere. An estimated half million left Spain last year alone. Ireland, which in recent decades actually attracted new migrants, was exporting a thousand people a week last year. In recession-wracked Britain, a 2010 poll found nearly half of the population would like to move elsewhere.

    Germany, with its ultra-low birthrate and rapidly aging population, has emerged as a primary migration beacon. Germany needs about 200,000 new migrants ever year to keep its economic engine humming. For decades, newcomers from Turkey and other Islamic countries have flocked there, but this migration has failed to deliver much added value due to their general lack of skills and divergent cultural values. So the Germans — as they did back in the 1960s — look to harvest the diminishing pool of skilled workers from equally aging states on the EU’s southern periphery.

    But it’s not simply a matter of a one-way south to north flow. Other EU countries, such as Italy, are playing the immigration arbitrage game by importing young workers from rapidly depopulating southeastern Europe. Milan, for example, added 634,000 foreign residents in just eight years (2000 to 2008), the largest share from Romania, followed by Albania. Over the period, more than 80% of Lombardy’s growth has come as a result of international immigration.

    But immigration arbitrage is more than a simple numbers game. As Europe learned through its bitter experience with immigration from North Africa and the Middle East, importing populations without necessary skills and attitudes useful for the modern economy can produce unhappy results. The key issue is how to attract and select immigrants likely to contribute to the national well-being and economic competitiveness.

    Almost everywhere in the world, there are shortages of skills ranging from construction to advanced engineering. Much of contemporary immigration to East Asia reflects the need for workers — largely from India, Bangladesh, Indonesia and Sri Lanka — to perform tasks considered “dirty, dangerous and difficult” (or 3-D).  Singapore and Hong Kong also have a bull market for high-end workers in order to maintain their increasingly financial and technology-oriented economies.

    But skills should not be conflated merely with university degrees. Education is no longer a guarantor of productivity; the degree, once a sign of distinction, has become a commodity. Many disciplines have little net positive economic impact. Few countries likely suffer shortages of post-modernist literature graduates, performance artists or lawyers.

    Opening the doors to undocumented high school graduates, many with no real marketable skills, as President Obama just did, may not have a great positive long-term effect on the economy. Perhaps it would be better if our immigration policies were less about politics, and ethnic constituencies, and more about gaining specific skills and abilities from other countries, including from Mexico’s growing ranks of educated and skilled workers.

    Some countries, such as Canada, Australia and Singapore, already have made major accommodations favoring skilled or entrepreneurial immigrants. The United States, to its great disadvantage, has been slow in this regard. In 2011 barely 13% of all American immigrants came as a result of employment-based preferences, down from 18% 20 years ago. Family reunification should remain a cornerstone of immigration but needs to give way substantially to a more skills-oriented policy.

    America’s approach is particularly baffling given our looming skills shortages. The reviving auto industry is already running short of craftspeople such as numerical machine tool operators. In fact, David Cole, chairman of the Center for Automotive Research, predicts that as the industry tries to hire upwards of 100,000 workers, they will start running out of people with the proper skills as early as next year.

    This shortage is also intense in many engineering and technically oriented fields. The Pittsburgh area alone has 1,500 engineering job openings. The Great Lakes Metro Coalition, covering 12 states, is advocating for a federal immigration policy focused on attracting highly skilled talent. Government and business leaders in economically healthy parts of the Great Plains, Texas and Utah now consider persistent skilled labor shortfalls — particularly in science and technical fields — as the greatest barrier to continued growth.

    Immigration policy should also look to bring in more entrepreneurs. As business start-ups overall have slowed, immigrants continue to launch new businesses. Today fully one-fifth of all American businesses are owned by immigrants, up from 12% two decade ago. Many of these are located in suburbs and small towns, where together a majority of immigrants see opportunities and a better quality of life.

    These qualitative distinctions may be lost on many in the pundit class. As a decline in Mexican immigration has driven overall immigration down below 2009 levels, the number of Asian newcomers is once again growing. Their share of annual new arrivals has risen over the past two years from 36% to 42%.

    Asians increasingly do not come for just economic opportunity — there’s often more of that at home — but to attain things almost impossible in their native countries  such as a single-family homes with a backyard and less congested, tree-shaded neighborhoods. For some, like migrants from China, political and religious freedom also is often a major attraction.

    This is good news for the future. As a Pew report recently pointed out, Asian immigrants tend to possess many of the characteristics this country sorely needs: a commitment to education, family and entrepreneurship. McKinsey suggests China and India will produce 184 million new college graduates over the next 10 years; this provides a vast pool of which the U.S. has only to pick up a small portion to boost its economy.

    This is not to argue for a policy based on ethnicity or geography. There are hard-working, skilled immigrants to be had from the poorest countries in Latin America or Africa. If you want to see this, go to any strip mall around Houston, Los Angeles or northern New Jersey.

    We need to target immigrants most likely to help our advanced industries, start businesses and families, and whose descendants will provide critical demographic vibrancy. There may soon be many such people looking to move from places like the Middle East, particularly Christians or liberal Muslims threatened by rising Islamism. There also should be policies to welcome restless young Europeans who may be seeking more opportunity elsewhere.

    The age of immigration arbitrage will require critical shifts in all advanced countries to provide many more openings for skilled immigrants and entrepreneurs. But ultimately the best way to attract these people lies in boosting the kind of economic growth and opportunity that can attract this most valuable resource to a country.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    This piece originally appeared in Forbes.

    Immigration rally photo by BigStockPhoto.com.

  • Rio-20: Eradicating Poverty Takes Precedence Over “Green Economy”

    The world’s largest English language newspaper, The Times of India reports that the Rio 20 Summit has agreed with India that "eradicating poverty should be given the highest priority, overriding all other concerns to achieve sustainable development." 

    The Times continued: "After a bitter fight with the developed countries, who wanted the objective of poverty eradication be made subservient to creating a ‘green economy’, India’s demand to put the goal of removing poverty above all other objectives in the final Rio+20 declaration — called "The Future We Want" — was agreed to…"

    The "G77" group of developing nations sought to ensure that economic and social sustainable developed goals were not secondary to "more green themes — such as renewable energy targets." The United States is reported to have supported the G77 position.

  • The Last Stop in Brooklyn

    Getting out was essential but I was stuck in Brooklyn until I could plot my escape…

    There was no such thing as “diversity” in white, working-class Bensonhurst in the 1950s. Only the Jews and the Italians.

    My tribe descending from Yiddish-speaking East European immigrants who settled in cramped tenements and worked in the schmatta trade of Manhattan’s lower east side.

    Moving – after the war – across the East River to apartments with bedrooms and bathrooms; a 50 minute commute to “the city” on the west end line of the BMT. Sharing the neighborhood with Southern Italian Catholics, a few Irish and fewer blacks and Puerto Ricans who worked for – but rarely lived among – us white “ethnics.”

    My father drove a cab six days a week and my mother typed for a living. We weren’t poor but sometimes for dinner my mother would serve macaroni with ketchup. Sally and Irv enjoyed themselves occasionally – they played penny poker with friends on Saturday night, she watched Liberace, he watched the Yankees, and now and then they would go out for “Chinese.”

    But much of the time they were frustrated and miserable. Irv was known to friends and cousins as “easy going” and – though he didn’t drink – could “snap” and do a lot of damage. Sally was always worrying and felt ashamed of her divorce in the 1940s. Her daughter, my “half” sister, twelve years older, lived with us and hated my father (for good reason).

    I was acting out at home – yelling, cursing and defiant – and in junior and senior high: cutting classes and on my way to becoming an official “truant” and dropout.   In the grip of adolescent anguish, by 14 I would ruminate incessantly about girls, particularly the local Italians, whose appeal was intensified by a taboo that would prevail into the 1970s and beyond.

    Even my pre-pubescent preferences leaned in that direction, stimulated by those lusty Italian ladies of Bensonhurst. Cleavaged, tight-skirted and toe-nail polished, they seemed more overtly libidinal than the Jewish women in the neighborhood. My fascination was a distraction from family problems and a way to imagine my escape.  I enjoyed other diversions, as well: scooting around the corner to play punchball or pedaling my bike to the Cropsey Avenue Park or buying an egg cream – for twelve cents – on Bay Parkway and 86thStreet.

    Rivalries erupted from time to time between the Jewish and Italian boys. I was involved in some of these courtyard fist fights. Though the violence was minimal (no weapons: just a few punches in the face, a headlock and then a submissive “I give.”), these neighborhood battles would not only contest virility but would reveal an ethnic-based class resentment.

    While many of my Italian peers became very successful academically, professionally and financially, it was the Jewish kids who were most eager to leave the old neighborhood (this is decades before the borough became trendy for Gen X bohemians). This ethic of upward and outward mobility, built into Jewish cultural DNA, has fashioned a Jewish-American Diaspora – from Hester Street to the “outer boroughs” to the upper west side, Hempstead Long Island, Southern California and points in between.

    For a time, I resisted the traditionally available route for a smart Jewish kid to get ahead.  Depressed and anxious, I was flunking out of school.  Developing instead the style of free spirit, a malcontent and a wanderer; a persona which required that I reject my parent’s values with a simplistic, snotty and condescending critique of them as vacuous and conventional.

    This fit right in with “generation gap” rhetoric and prevailing notions of liberation pulsing through the counter culture in 1967.  I could distance myself from my painful past and pathetic parents, disparage their “material values” – appalled, for example, by their choice to cover their sofa with clear, thick, sticky plastic – and fashion myself as superior.

    It would take awhile before I would better understand how my parent’s lives shaped my political values. By my late teens I saw as merely incidental the fact that they had joined the ranks of  New York’s unionized civil service. My father was forced out of taxi driving by his health, becoming a clerical for the state insurance fund; my mother putting her fast fingers to work for the city’s board of education.

    But a lonely 17-year-old had no time for such reflections.  On nights when I had trouble sleeping, I would slink out of my parent’s apartment to wander the streets. There was always the faint hope of an exotic sexual encounter, but most of these three-in-the-morning outings were a time for thoughtful solitude.

    Walking past the Coney Island Terminal – the last stop for Brooklyn-bound trains from Manhattan – just a few blocks from the Atlantic Ocean and the famous Boardwalk, Aquarium, Cyclone and Nathan’s, I was ruminating over my academic circumstances.

    In a few hours, I would be starting a new high school. (My parents and I had, in fact, deserted Bensonhurst – but only barely – relocating a few neighborhoods south to Brighton Beach which, ten years later, would take in thousands of Soviet émigrés and gain national fame as “Odessa by the Sea.”)

    I stayed up all night, walked along Surf Avenue as far as “Seagate,” (one of America’s oldest gated communities on the western edge of Coney Island) and – somewhere along the way – decided to stop screwing around in school.

    I could tell this was a big deal.  Later in life when I started to chart these pivotal events, I would mark my Surf Avenue expedition as the first of many.

    That semester in Lincoln High I stuck to my resolve, dropping bookkeeping and merchandising, flipping back to a college prep curriculum, re-taking failed classes – geometry, biology – and planning an extra year in high school.

    Though I would finish Lincoln with a weak overall record, my academic performance improved substantially the final two years – enough to let me shop around for a college which would recognize my potential.

    The last stop on my exit from Brooklyn would be the NYU psychology clinic for nine months of analytic psychotherapy with a grad student who would later become a successful New York analyst. Nowadays, concerned and proactive parents who detect problems in their kids are quick to refer them to psychologists for therapy and psychiatrists for medication. But this was my initiative and I jumped at the chance to see a “shrink.” Twice a week I rode the subway into lower Manhattan and – for 50 cents a session – began what would be decades of various forms of psychotherapy (including a brief period in which I aspired to be a therapist myself).

    Coincidentally – and ironically (given my ultimate career choice) – in 1970, the NYU psychology clinic building was located at 23-29 Washington Place which, 60 years earlier (then known as the Asch Building) was the site of the Triangle Shirt Waste Factory fire which killed 146 immigrant garment workers – mostly young Jewish women.

    I didn’t find out until years later that the building held such enormous historical significance; that this epic tragedy – which triggered fire code and workplace safety reforms across the country – took place at the spot where I was preparing for my life as an adult.

    Though oblivious to quite a bit happening around me (preoccupied with, among other things, overcoming my awkwardness with girls), I was however starting to absorb some of what was going on in the world.

    I could recount stories here about my cultural and political “awakenings” – tying my personal development to iconic historical events: the M.L. King and Bobby Kennedy killings, Woodstock (I was there), the Democratic National Convention police riot (I wasn’t there) – but I’ll save for another time my detailed reflections on this period in American culture and politics. Hasn’t enough already been said about how sex, drugs and rock ‘n roll changed our lives?

    Though I was linked to prevailing counter-culture sentiments – appropriately appalled by the War in Vietnam and other U.S. “atrocities” – my political views were confined (or should I say restrained) by a mainstream liberal tendency that I’ve maintained to this day.

    Sure I was impressed by Ivy League SDSers taking over the dean’s office – I respected their dedication to social causes (and the fun they seemed to be having). But my own working-class resentments may have been surfacing in reaction to what was then perceived – not always correctly – as the “privileged” student protesters of American middle class families.

    My working-class “liberal populism” reflected my parent’s political values pretty closely (though I couldn’t know this at the time).  One example would be my lack of resistance to Hubert Humphrey in the 1968 presidential.  The “no difference” argument didn’t hold as I lined up happily with New Deal Labor Dems to try to beat Nixon.

    I also took an intense interest in the reform movement in Eastern Europe against communist totalitarianism.  While I assume most American liberals and radicals at the time aligned with Czechoslovakians in their protest against Soviet tyranny, I felt a particular affinity for the young reformers.   My revulsion to Soviet Communism was sealed for life when Russian tanks and troops crushed Alexander Dubcek’s Prague Spring.

    I don’t want to make too much of all this – I was just a kid – but I always felt a slight pull to the political center and couldn’t quite wrap my head around radical-chic notions about the Panthers, Mao or a range of utopian ideas espoused by elements of the new left. Though I might have looked like one, I was not a revolutionary.

    Twenty years later, I would find a very nice fit within the American Labor Movement, navigating comfortably among the so-called old guard and the new generation of union militants.  I would develop a revisionist view of Sally and Irv, less critical of their values and more appreciative of how a few extra dollars in their pockets – thanks partly to the New York public sector unions – could make a big difference in workers’ lives.

    I would also take on a more balanced – you could say compromised – view on the potential for personal transformation and social change.  Economic conditions do shape peoples lives, but individual choice enters the mix.  America – at its best – gives you a shot (at least it used to) and you make of it what you will.

    As a Brooklyn, working-class, Jewish American – introspective and inclined toward progressive (but practical) politics – I feel lucky to have come as far as I have.

    I’ve spent my life trying to overcome an agitated mother and angry father.  By 10, I was bratty and foul-mouthed; by 13, sexually-fixated and withdrawn; by 16, defiant and delinquent.  To compensate, I would develop very subtle behaviors to conceal my feelings of isolation.

    But I’m getting ahead of myself.  By the end of the 1960s, these formations were incubating.  In the 1970s I would work on my narrative: success on my own terms and an ongoing struggle for American justice and personal salvation.

    I would also figure out that blaming parents or “society” for low self-esteem – even if it opens the door to self-acceptance – can only take you so far.

  • Enterprising States 2012: Beating the New Normal and Policies that Produce

    The following is an exerpt form a new report, Enterprising States, released this week by the U.S. Chamber of Commerce and National Chamber Foundation and written by Praxis Strategy Group and Joel Kotkin. Visit this site to download the full pdf version of the report, or check the interactive map to see how your state ranks in economic performance and in the five policy areas studied in the report. The full report include a case for the nation beating the "new normal" and lists of best-performing states by policy area, and an index to select the top 10 states likely to continue to grow.

    Troubled by economic stagnancy and high unemployment, many pundits and policy makers are referring to the U.S. economic malaise as the “new normal,” claiming that we have reached both technological and economic plateaus. To be sure, the relative weakness of the current recovery – arguably the weakest in contemporary history – does support the “new normal” thesis.

    Not everyone, or every state, accepts the notion of inevitable, slow growth and gradual decline. From the onset of the recession, some states have largely avoided the downturn. By the end of 2011, six states – North Dakota, Wyoming, Alaska, Utah, Texas, and Montana – showed more than 8% job growth over the past decade. Another 22 had shown some, although less robust, employment increases compared to 2001.

    More important still, nearly every state enjoyed some overall private-sector job growth between January 2011 and January 2012. Most critically, growth has spread to many states hardest hit by the recession, including Michigan, California, and Florida. The strongest job growth continued to take place in other states, notably Louisiana, Oklahoma, Texas, Utah, and North Dakota.

    The new geography of growth reflects many of the intrinsic strengths of the U.S. economy often missed by many policymakers and commentators. After a brief lapse, the country is already outperforming all its traditional high-income rivals in Europe, as well as Japan, as it has done for most of the past two decades. Key U.S. assets include surging agricultural and energy production, the general rebound in U.S.-based manufacturing, and unparalleled technological supremacy. The country remains attractive to both foreign investors and skilled immigrants.

    For the U.S. to be successful, this new geography of growth needs to extend across the 50 states and expand for long enough to significantly lower the high rate of unemployment. This will require something more than a single-sector focus. Attention must be paid to both basic and advanced industries since innovation and technology growth alone cannot turn around most regions and states. 

    More than anything, governments and business leaders need to appreciate how these sectors interact with each other. To be effective across all geographies, innovation must be applied to a broad array of industries, including but not limited to computers, media, and the Internet. Innovation and new technologies are also a means to unlock the productive potential of both mundane traditional industries and the service sector.

    States striving to do well in this environment face many barriers to fostering economic growth and creating jobs. These barriers include the high level of debt in many states; a growing skills mismatch between the workforce and the jobs available within a state; and outdated regulations and taxes that serve as barriers to free enterprise.

    Policies that Produce

    In the ebb and flow of the global economy, states can no longer rely solely on strategies of keeping costs low and providing incentives to attract footloose, commodity-based branch plants or offices. Instead, states must create the right business climate that allows companies and entrepreneurs to create 21st century jobs. 

    Dramatic changes in the scope and scale of the global economy have significantly altered the nature of foreign competition. Jobs are the new currency for leaders across the globe, and those who can create good jobs will own the future. With 95% of the world’s customers now living outside our borders, trade with other countries is a key part of our economy that will continue to be important long into the future. 

    Businesses need a highly skilled workforce – which includes many workers with certificates or two-year degrees – that is able to perform the jobs of a 21st century economy. States that are able to get students involved in the STEM fields – science, technology, engineering, and math – will be the most competitive. 

    Innovation, now the essential driving force for creating and sustaining economic opportunities, is much more multidisciplinary and global in scope than ever before. Innovation and market cycle times are much shorter and continue to accelerate. This makes it more important than ever that states provide the tools, support, and tax and regulatory environments for companies to continuously innovate without onerous delays and burdensome costs that put their entrepreneurs and businesses at a competitive disadvantage.

    Enterprising States 2012 takes an in-depth look at the specific priorities, policies and programs of the 50 states. Generally, the states fostering economic growth and creating jobs today – and those most likely to grow in the next decade – are defined by the following broad policy approaches:

    • Parlaying their natural resources and historically competitive industry sectors into 21st century job-creating opportunities
    • Paying attention to and addressing their competitive weaknesses
    • Supporting their companies’ business development efforts to reach an expanding global marketplace
    • Creating a fertile environment and workforce for a technology-based and innovation-driven economy
    • Investing in infrastructure – digitally and physically engineered – that meets the operating requirements of business and connects businesses to markets and customers
    • Getting government, academia, and the private sector to collaborate effectively to make sure that more new ideas developed by companies and in research labs scale up into industries
    • Taking steps to make existing firms more productive and innovative, creating an environment in which new firms can emerge and thrive
    • Maintaining an affordable cost of living for middle-skilled and middle-class employees
    • Promoting education, workforce development and entrepreneurial mentoring to continually fill the talent pipeline
    • Fostering an enterprise-friendly business environment by cleaning up the DURT (delays, uncertainty, regulations, and taxes), modernizing government, and fixing deficiencies in the market that inhibit private-sector investment and entrepreneurial activity.

    State policies and programs that most effectively promote job creation are rooted in market reality. This means building on the existing core industries and technological advantages of a state while pursuing opportunities in growing and emerging sectors. Building on and sustaining existing economic momentum remains a key means of guaranteeing success in the future.

    Huge increases in food exports, domestic energy investment, a revived manufacturing sector, a burgeoning tech sector, vital demographics, and increased investment from abroad create a strong base for long-term secular recovery of the U.S. economy. Rather than facing a dismal future of the new normal, we may actually be on the cusp of a recovery that could become one of America’s finest moments. The key to making this work, for the states and the nation, lies in policies that promote broad-based, long-term economic growth.

    Download the full report, or read the Enterprising States 2012 coverage at the National Chamber Foundation blog.

    Praxis Strategy Group is an economic research, analysis, and strategic planning firm. Joel Kotkin is executive editor of NewGeography.com and author of The Next Hundred Million: America in 2050.

  • Is Perestroika Coming In California?

    When Jerry Brown was elected governor for a third time in 2010, there was widespread hope that he would repair the state’s crumbling and dysfunctional political edifice. But instead of becoming a Californian Mikhail Gorbachev, he has turned out to be something more resembling Konstantin Chernenko or Yuri Andropov, an aged hegemon desperately trying to save a dying system.

    As with the old party bosses in Russia, Brown’s distinct lack of courage has only worsened California’s lurch toward fiscal and economic disaster. Yet as the budget woes worsen, other Californians, including some Democrats, are beginning to recognize the need for perestroika in the Golden State. This was most evident in the overwhelming vote last week in two key cities, San Diego and San Jose, to reform public employee pensions, a huge reversal after decades of ever more expansive public union power in the state.

    California’s “progressive” approach has been enshrined in what is essentially a one-party state that is almost Soviet in its rigidity and inability to adapt to changing conditions. With conservatives, most businesses and taxpayer advocates marginalized, California politics has become the plaything of three powerful interest groups: public-sector unions, the Bay Area/Silicon Valley elite and the greens. Their agendas, largely unrestrained by serious opposition, have brought this great state to its knees.

    California’s ruling troika has been melded by a combination of self-interest and a common ideology. Their ruling tenets center on support for an ever more intrusive, and expensive, state apparatus; the need to turn California into an Ecotopian green state; and a shared belief that the “genius” of Silicon Valley can pay for all of this.

    Now this world view is foundering on the rocks of economic reality. The Soviet Union armed itself to the teeth and sent cosmonauts into space while the public waited on line for toothpaste and sausages. Similarly, Californians suffer from a combination of high taxes and intrusive regulation coupled with a miserable education system — the state’s students now rank 47th in science achievement — and a rapidly deteriorating infrastructure.

    The current recession has been particularly severe, continuing at a more acute level than in most states, including places like Florida and Arizona, which also suffered greatly from the housing bust. California now has the third highest unemployment rate in the U.S., beating out only its co-dependent evil twin Nevada and Rhode Island. At the same time, according to a recent Public Policy Institute of California study, inequality in the devoutly “progressive” state has been growing much faster than in the rest of the country.

    The most auspicious sign of grassroots support for perestroika was last week’s smack down of public employee unions in San Jose and San Diego. For the first time in recent memory, the unions suffered a humiliating defeat — the measures passed by a margin greater than two to one — as voters endorsed deep reform of the pension burdens bringing these cities to the brink of bankruptcy. Backed by its Democratic mayor, Chuck Reed, San Jose’s measure B aims to reduce pension benefits for both future and current hires. Unsurprisingly, the public employee have threatened to sue.

    This may precipitate what could become the California equivalent of a prairie fire. Like San Jose and San Diego, many other California cities are on the verge of bankruptcy. Union-dominated Los Angeles could be the next big domino to fall, according to the city’s own chief administrative office, and has been forced to boost its bonded indebtedness and cut back on critical infrastructure spending to stave off the inevitable.

    As services drop and taxes rise — California’s already are among the nation’s highest — voters increasingly realize that one of the main problems is over-generous pensions for public sector workers. This is reflected in the sad reality that the state consistently competes with Illinois for the worst bond rating in the country. Most recently, the state upped its deficit estimate to $16 billion from a $9.2 billion estimate made just in January.

    Brown could have used this mounting crisis to reveal his inner Gorbachev. But instead, he has so far chosen a classic Chernenko-Andropov muddle. He proposed a mild pension reform but could not persuade his own party — aware that vengeful the unions will be around long after the old man is gone — to consider it.

    More recently, the governor showed his own inner Stalinist by jettisoning his original more modest tax increase proposal for a more radical teachers’ union measure that would raise California’s income tax to the highest in the nation.

    Brown’s “millionaire’s” tax, as it is being marketed, starts with individuals making $250,000 or more. Right now it is still ahead in the polls but seems to be losing ground. Joel Fox, a longtime anti- tax activist, senses that people in the state — as evidenced by the San Jose and San Diego votes — are beginning to realize that the tax increases are designed primarily not to improve the schools, keep the parks open or pave the roads but simply to bolster public-sector pay and pensions.

    This collective turning on of the civic light bulb comes at the same time that the primary economic delusion that has dominated progressive politics — the myth of the high-tech savior — has fallen into disrepute. Under Brown and his monumentally incompetent predecessor, Arnold Schwarzenegger, state officials maintained a belief that Silicon Valley’s money machine would be able to bail the state out of its budgetary morass.

    In this context, the underwhelming performance of Facebook’s IPO last month takes on major political significance. Not only will there be fewer puerile billionaires to inflate the Valley real estate market and bankroll “progressive” candidates and causes, scores of hip wannabe start-ups suddenly may find themselves no longer the darlings of venture capital investors or the stock market. Like California’s budget itself, the social media boom is now looking like something of a fraud.

    Another potential casualty of the weak economy could be the green drive to remake the state into a kind of Ecotopian paradise. This is evident in growing opposition to some of Brown’s most beloved initiatives, notably a fantastically expensive high-speed rail system. Sold in the euphoric progressive atmosphere of 2008, support has collapsed as the price tag has soared and the state’s grievous fiscal problems have worsened. The most recent LA Times poll currently finds nearly three in five California voters would like to see the project scrapped.

    Once unassailable politically, the environmental community is fracturing between those thoroughly allied to rent-seeking capitalists and the Democratic Party and those still primarily concerned with preserving nature. The Sierra Club, for example, objects to Brown’s attempt to exempt the high-speed line from environmental review. Some Greens also object to Brown-supported projects like the massive tortoise-roasting solar farm planned for the Mojave Desert.

    Both Brown and the Greens also have failed to deliver many of the much ballyhooed “green jobs” that they insisted their policies would produce. Instead they may soon have to confront an electorate increasingly skeptical about green fantasies and more concerned with a persistently under-performing economy.

    Clearly, the conditions for a California perestroika are coming into place. Still missing is a coherent vision — from either Independents, centrist Democrats or Republicans — that can unite business, private-sector workers and taxpayers around a fiscally prudent, pro-economic growth agenda. Yet it’s clearly good news that , for the first time in a decade, there’s hope that the whole corrupt, failing California political edifice could come crashing down, providing a renewed hope for recovering the state’s former greatness.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    This piece originally appeared in Forbes.

    Jerry Brown photo by BigStockPhoto.com.

  • From California to Canberra, the Real Class War

    Just under a year before she crawled over Kevin Rudd to claim the Prime Minister’s office, Julia Gillard visited the United States in her then capacity as Australia’s Education Minister. Her stay in Los Angeles took in the Technical and Trades College, where she brushed up on the teaching of “green skills,” a subject close to her heart. “Here in Los Angeles," she told the media that day, “under the leadership of Governor Schwarzenegger, this is a state that is looking to the future; this is a state that is leading on climate change adaption; and this is a state that’s leading on green skills and I’ve seen that on display today at this college.”

    The date was 5 October 2009. As far as dud forecasts go, these platitudes don’t match Lincoln Steffens on the Soviet Union – “I’ve seen the future and it works” – but they’re bad enough. Today Schwarzenegger has gone, his reputation in tatters, and California, reduced to issuing IOU’s to pay its bills, teeters on the brink of bankruptcy.

    Australians have long seen California as a trend-setter, given the common Anglophone culture and semi-arid climate on the Pacific Rim. There’s also the shared love of motor car mobility and suburban independence, and a voracious appetite for tech and entertainment products pouring out of Hollywood and Silicon Valley. But these days the Golden State is just as likely to fill Australians with unease. They find themselves infected with a strain of the green-welfare-utopianism that brought California to its knees.  

    Sure, this doesn’t show up in official statistics; at least not yet. Gillard and Treasurer Wayne Swan never tire of reminding Australians they are “the envy of the world”: unemployment at 4.9 per cent, GDP growth of 3 percent (or more) this financial year, government debt to GDP ratio of just 23 percent and a projected budget surplus in 2013. In April, the IMF predicted that Australia would be the best performing advanced economy over the coming two years. The government and its allies in the elite media are hyper-vigilant about containing discussion of the nation’s affairs within this bounteous frame.

    It’s hard to reconcile Australia’s position with the plight of California, which routinely attracts phrases like “basket case.” Unemployment is running at around 11per cent, significantly above the national US average of 8.2 percent, and Governor Jerry Brown is struggling with an intractable budget deficit of around $US20 billion. Thousands of teachers and other public servants are being laid off, and revenue imposts are driving businesses to other states. One commentator went so far as to say “California’s situation is in some ways more worrisome than Greece’s,” since it represents 14 per cent of the American economy, while Greece only accounts for 2 per cent of the EU.

    But if any of this is supposed to make Australians feel good about their lot, it doesn’t. However benign the headline figures look, they’re in a restive mood. The Westpac-Melbourne Institute index of consumer sentiment continues to languish in negative territory, and the latest Roy Morgan Monthly Business Confidence Survey recorded a 57 percent fall in businesses which believe “Australia will have good economic conditions in the next 12 months”. Astonishingly, the recent Boston Consulting Group consumer sentiment survey found that Australians feel less financially secure than the average European, even less secure than Spaniards, whose economy is in meltdown.

    Nor is much love flowing to Gillard and Swan. Stuck in opinion-poll hell – support for the government has been around 30 percent for over a year – they would be thrown out in a landslide if an election were held today.  

    Why are Australians so low when their economy is so high? The chattering classes are in a funk over this conundrum. People should be showering this fine progressive government with praise, they insist. In patronising tones so familiar around inner Sydney and Melbourne, one columnist scribbled “we are, as a nation, chucking a full-on, all-screaming, all-door slamming teenager temper tantrum … Maybe it’s time we grew up and realised how good we’ve got it.” Others suggest more sober explanations.

    Topping the list is Gillard’s absurd $23 a tonne carbon tax, effective from 1 July this year. Most pundits are loath to concede that, in international terms, the measure is quite radical and Gillard only embraced it to appease the Greens. From the comfort of their armchairs, they dismiss fears about the tax as irrational. After all, Treasury modelling indicates that the effect on growth will be minuscule and, under the government’s package, households will be over-compensated for cost of living increases. If only the Opposition would drop its inflammatory attacks, they maintain, the pessimism would disappear.

    Some blame the negative wealth-effect of sliding house prices and shrinking superannuation funds, battered by stock market volatility.  

    No doubt, such factors do contribute to the malaise, along with loss of faith in a parliament hit by financial and sexual scandals implicating the Speaker and a Labor MP. But opinion-makers who refuse to look beyond the headline figures are concealing the larger story. Across a range of traditional industries, workers grasp that the economy is shifting in directions that could erode the foundations of their mobility and independence. Understanding more than they are given credit for, they fear that the current Labor Government, beholden to Greens and academic elites, and hiding behind stodgy rhetoric, is driving or exploiting those shifts. The most visible manifestations of this are the carbon tax and other green agendas.

    These workers have cause to be worried, if they glance across the Pacific. In his close analysis of the California crisis, US demographer Joel Kotkin starts with the premise that “California consolidated itself as a bastion of modern progressivism.” Drawing on extensive evidence, Kotkin exposes the suffocating influence of radical environmentalists, progressive high-tech venture capitalists, Hollywood moguls, and civil rights attorneys, who have given California escalating energy costs – 50 per cent above the US average and rising – and dwindling fossil-fuel energy exploration and production, America’s sixth highest tax rates, also rising, coupled with proposals to skew the tax system in favour of the super-rich against microbusinesses, the third heaviest tax burden on business out of the 50 states, enormous subsidies and tax breaks for solar and other renewable-energy producers, and complex labour laws.

    “California’s green policies”, says Kotkin, “affect the very industries – manufacturing, home construction, warehousing, and agribusiness – that have traditionally employed middle and working class residents”. With reason, Kotkin calls these developments The New Class Warfare. There is indeed a class dimension to discontent in the United States and Australia, and it has nothing to do with the confected class-war rhetoric coming out of the Obama Administration – “we must all pay our fair share” – and the Gillard Government –“spreading the benefits of the [mining] boom”.  

    John Black, a demographic profiler and former senator, points out that since Labor came to power in 2007, “public administration, education, and health sector jobs have accounted for almost six out of ten of the 760,000 jobs created, instead of the longer term two out of ten.” The health industry alone has grown by 260,000 jobs in four years, a figure that equates to some 2.6 per cent of the whole workforce. Over those years, manufacturing, which accounts for 8.3 of total employment, lost close to 100,000 jobs.

    Last year, “health care and social assistance” replaced “retail trade” as the largest occupational category profiled by the Australian Bureau of Statistics, while “manufacturing” along with “agriculture, forestry and fishing”, traditional blue-collar hubs, were the only categories to contract. "Education and training" and "public administration and safety" ranked higher than "transport, postal and warehousing" and "wholesale trade".

    Job-shedding by a succession of manufacturing, retail and construction firms has dominated recent news bulletins. According to Black, if not for growth in the publicly-funded sector, the employment rate would be closer to 7 than 5 percent.

    If Gillard and Swan are to be believed, such shifts are beyond their control. In a major address on the economy in February, Gillard explained that “the level of the dollar – and the pace of its rise – has broken some business models and forced economic restructuring”. Displaying Marie Antoinette levels of indifference, she declared “these are powerful, economy-wide transformations, perhaps best thought of as ‘growing pains’.” If you thought this posed a complex challenge, think again. “The equation is simple,” she said, “skills brings jobs, and skills bring job security.”

    Here Gillard genuflects to the progressive dogma that education is the answer to every economic problem. It’s hardly surprising that a movement dominated by academics, researchers, educators and university administrators should claim ownership of the path to salvation. But Gillard has it back-to-front. In activities like manufacturing, economic growth brings jobs, which bring skills, not the other way around.

    It’s true that the mining boom and Australia’s safe credit rating have driven the dollar to near or above parity with the greenback. It’s also true that this has exerted pressures on the export and import-competing sector. But government action has intensified these pressures. Labor is ideologically committed to social gentrification and expansion of the white-collar professional classes, particularly in social services, even if this means transferring resources from productive industries that will slow down, stagnate, shrink or vanish.

    While Gillard and Swan would never be so candid, their allies in Australia’s bulging university system, the public sector unions and the Greens aren’t so inhibited. Nor are Labor figures like former Prime Minister Paul Keating, who criticised the Opposition’s attack on the carbon tax in these startling terms:

    … in this country, 80 per cent of people work in the tertiary economy, in services, in the industry like – as we are tonight, in the service economy. And, the new industries, the green industries, are service industries, not the old manufacturing. Manufacturing’s moved to the east [meaning East Asia]. It’s the service industries that are the new growth industries. So, to turn your back on the mechanism which allocates the capital out of the old industries and into the new ones is to turn your back on the future.

    If Gillard Labor cared about blue-collar and other routine jobs, not to mention the small business sector, they would switch to policy settings that spur growth in industries like manufacturing, retail, transportation and logistics, construction and forestry. Cutting spending, reducing company and other business taxes, junking green taxes and green tape, withdrawing from the debt market and liberalising industrial relations would hand employers more flexibility to cope with the high dollar and low cost competitors in Asia.

    Clearly, this isn’t the government’s priority. Instead they have introduced a carbon tax and a mining tax, and in last month’s budget dropped a proposed cut in company tax, they are throwing at least $2.7 billion at various green schemes, not including the “winner picking” $10 billion Clean Energy Fund, they have adopted a Renewable Energy Target of 20 per cent by 2020, they are pouring vast sums of money into higher education to the tune of $5 billion a year including an additional $5.2 billion in the budget, some of which will find its way into a maze of “sustainability institutes,” they have lifted the cap on university places and embarked on a radical plan to expand the proportion of 25 to 34 year olds with a bachelor’s degree to 40 per cent by 2025, they have re-regulated the labour market and imposed a system which, according to the chairman of BHP-Billiton, “is just not appropriate and doesn’t recognise today’s realities,” they have laid the groundwork for new multi-billion-dollar programs in aged, disability and mental health care, employing tens of thousands of new carers, and they have endorsed an industrial tribunal decision that boosts the pay of these workers by up to 65 percent.

    California here we come.

    John Muscat is a co-editor of The New City, where this piece first appeared.

    Photo of Australian Parliament House by BigStockPhoto.com.