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  • The Evolving Urban Form: Kolkata: 50 Mile City

    More than a decade ago, the Sierra Club and I crossed keyboards over urban density. The Sierra Club had just posted a new "neighborhood consumption calculator," that gave visitors the opportunity to look at the purported impacts of various density levels. The Sierra Club designated 500 dwelling units per acre as "efficient urban." Independently, Randal O’Toole and I quickly were on the Internet pointing out the absurdity of such high density. I noted that the so-called "efficient urban" density was far higher than that of the "black hole" of Calcutta, and high enough for all US residents to live in the Portland urban area.

    Within 24 hours of our responses, the "neighborhood consumption calendar" had been taken off the Internet. It was later to reappear with "efficient urban" density being discounted a full 80 percent, to 100 housing units per acre. This is still far more dense than nearly all of the world except for low income world shantytowns.

    The Kolkata Municipal Corporation (KMC): The central city of Calcutta, now called Kolkata, remains one of the densest on earth. Its population density is 63,000 per square mile (24,000 per square kilometer)  is nearly the same density as in Manhattan or the Ville de Paris. More accurately, it resembles the entire urban area densities of Mumbai and Hong Kong. The expanding suburbs of Kolkata have a population density of 25,000 per square mile (9,000 per square kilometer). The next edition of Demographia World Urban Areas (due out in the spring) will estimate the population density of the Kolkata urban area at 30,000 per square mile (12,000 per square kilometer).

    Kolkata’s spreading urbanization, however, has been going on for at least a half century. Since the 1951 Census, the central city of Kolkata has accounted for only 19% of the urban area population growth. The central city has added nearly 1,800,000 people while the suburbs have added approximately 7,650,000 (Figure 1).

    Over the past two decades, the central city’s growth has been minimal, adding 87,000 people from 1991 to 2011, while the suburbs added more than 3 million new residents. This intensifies the pattern of the last half-century where most growth clustered close to the city core.

    Between 1901 and 1951, 59% of the growth in the Kolkata urban area was in the central city (Kolkata lost the British capital to Delhi in 1911).


    Photo: Victoria Memorial, KMC

    Slower Growth in the Urban Area: Kolkata is an unusually shaped urban area, nearly 50 miles (80 kilometers) long and stretched along the Hooghly River, one of the many mouths of the Ganges. Dhaka, the megacity capital of Bangladesh used to be on a mouth, until the river’s course changed. The urban area averages little more than 10 miles (16 kilometers) in width. The municipality of Kolkata is in the south, on the east bank of the Hooghly, with most of the suburbs to the north or just across the river.

    Like a number of major urban areas around the world, Kolkata has seen its population growth slow markedly. The peak population growth decade was the 1930s, when there was an increase of 69%. Growth dropped to 29% during the 1940s but continued at 20% or more until 2001. However, between 2001 and 2011, the urban area growth rate dropped to 7%, as the area added only 900,000 new residents. Despite its earlier, smaller size, the Kolkata urban area had not added this few people since the 1921 to 1931 decade.

    In reality, Kolkata is getting less dense by the day. The results of the 2011 Census of India showed that every new resident of the Kolkata urban area was added in the suburbs (Note 1). Yes, the central city of Kolkata remains very dense but its population fell from 4,573,000 people in 2001 to 4,487,000 people in 2011. At the same time, the population of suburban Kolkata grew by nearly 1,000,000 people, and accounted for 110% of the population growth.


    Photo: Howra Bridge, Hooghly River (Howra)

    Kolkata, Los Angeles and China: It also may seem strange that despite its huge typically third world growth since 1951, the Kolkata urban area grew at a rate similar to that of the Los Angeles urban area (Note 2). Los Angeles was larger from the 1960s to 1990, while Kolkata was larger in the 1950s and has been larger the last two decades (Figure 2). Still, Kolkata’s growth has fallen to high income world rates. Other Asian megacities (over ten million)  including Delhi, Shanghai, Beijing, Mumbai, Shenzhen, Manila, Jakarta, Dhaka and Guangzhou) have all experienced much faster growth over the past decade (Note 2). Shanghai and Beijing combined added nearly the same number of people as live in Kolkata.

    Hyper-Densities: Nonetheless, Kolkata continues to have some of the highest densities in the world. In 2001, one third of the central city population (1.49 million) live in slums and shantytowns (photo). They are crammed into just 2 square miles (5 square miles). This would be like all the population of the San Fernando Valley living within a radius 0.6 miles (1 kilometer) of Los Angeles City Hall or all the population of the city of Dallas in the space covered by the passenger terminals at Dallas-Fort Worth International Airport. This is more than 725,000 people per square mile (280,000 per square kilometer), and would nearly equal the "efficient density" definition that the Sierra Club wisely discarded. It can only be hoped that when the 2011 Census slum data is available, it will show that all of the city of Kolkata’s  population loss will have been from the slums.

    Kolkata, like that of other large urban areas around the world described in The Evolving Urban Form series, shows that, given a chance, people reveal their preferences by moving to more space, to construct a better life for themselves and their households.


    Photo: KMC Slum

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

    Kolkata Urban Area: Population 1901-2011
    Year Kolkata Municipal Corporation (KMC) Suburbs Kolkata Urban Area (Urban Aggolmeration) KMC Share of Growth KMC Growth Suburban Growth
    1901         848,000         662,000          1,510,000 56.2%
    1911         896,000         849,000          1,745,000 51.3% 5.7% 28.2%
    1921      1,031,000         854,000          1,885,000 54.7% 15.1% 0.6%
    1931      1,141,000         998,000          2,139,000 53.3% 10.7% 16.9%
    1941      2,109,000      1,512,000          3,621,000 58.2% 84.8% 51.5%
    1951      2,698,000      1,972,000          4,670,000 57.8% 27.9% 30.4%
    1961      2,927,000      3,057,000          5,984,000 48.9% 8.5% 55.0%
    1971      3,149,000      4,271,000          7,420,000 42.4% 7.6% 39.7%
    1981      3,305,006      5,888,994          9,194,000 35.9% 5.0% 37.9%
    1991      4,400,000      6,622,000        11,022,000 39.9% 33.1% 12.4%
    2001      4,573,000      8,633,000        13,206,000 34.6% 3.9% 30.4%
    2011      4,487,000      9,626,000        14,113,000 31.8% -1.9% 11.5%

     

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    (Lead Photo: Mahatma Gandhi Road, KMC.

    —–

    Note 1: This is the Kolkata "urban agglomeration," which is the term the Census of India uses to denote urban areas, or areas of continuous urban development. The Census of India, however, applies to criteria to its urban area definitions that make them difficult to compare to urban areas in other parts of the world. The Census of India does not, for example, allow an urban agglomeration to be defined across state lines. Thus, the Delhi urban area continues to be shown as smaller then the Mumbai urban area. This is despite the fact that the immediately adjacent urbanization of Delhi includes millions of additional people in the states of Haryana and Uttar Pradesh and is by international definition by far the largest urban areas in India. The other difficulty is that the Census of India includes the entire land area of any municipality in the urban area. Thus, where municipalities are particularly large in area, as in the case of Mumbai, considerably more land area is reported that he is truly urban. This can lower urban area densities by the inclusion of large areas that are rural. In the case of the call, urban area, the municipalities are generally much smaller, and the geographical definition of the Census of India is much closer to a genuine definition of an urban area or urban agglomeration.

    Note 2: The Mission Viejo urban area is included in the 2000 Los Angeles urban area population in this comparison. Much of this urban area was included in Los Angeles before the 2000 census and it seems likely that it will be reunited with Los Angeles in 2010. The 2010 US urban area geographical definitions have not yet been released. Based upon the change in the Los Angeles metropolitan area population, it is assumed that the Census Bureau’s urban area will show a population of approximately 12.5 million.

    Note 3: Chongqing is sometimes incorrectly characterized as a megacity, because of its status of a "provincial level municipality" in China. However, the Chongqing provincial municipality is largely rural, and covers a land area similar to that of Austria or Indiana. The Chongqing urban area has a population of approximately 7 million.

  • Population Change 2010-2011: Interesting Differences

    The recently released estimates of population change and the natural increase and migration components of that change for 2010-2011 contain a few surprises, as well as much what has come to be expected.  What we population freaks have been awaiting are estimates of the components of change for the whole 2000-2010 decade, but these are still being adjusted, in part because of the tremendous complexity of migration and immigration and, yes, estimating  just who is in the country!

    I provide four simple maps, one of population change, 2010-2011,  one for the portion f that change due to natural increase (births less deaths), one for immigration and one for domestic or internal migration between the states.  Overall the big news is a slowdown of growth, to only .92 %, the lowest since the 1940s. This was due to a fewer  births, and thus of natural increase, because of folks not marrying or marrying later, and or postponing births because of the recession. It also has to do with  a reduction in immigration, again because of the recession, and possibly because of anti-immigrant sentiment and policies.

    The second big news is the somewhat surprising shift of some rapid growth to areas beyond the sunbelt and towards the northern tier.  Still impressive absolutely, the pace of growth has slowed in states such as Florida and Georgia, more so in Arizona and even more in Nevada, from the housing collapse and lower immigration. The South Atlantic region remained strong, but the new locus of faster growth is the “northern tier” from Minnesota through the Dakotas to Oregon and Washington. The Dakotas’ growth, also affecting Montana and Wyoming, is energy related, while that of Washington, now the 6th fastest growing state, is a reflection of a young population, continuing immigration, both high tech and agricultural growth, and a relatively robust economy.

    Natural increase. Natural increase is low in the states with the highest shares of the elderly, most obviously Florida, Pennsylvania, West Virginia and northern New England, in general regions and states from which young people have moved, e.g., MI, OH, KY, MO, AR, LA, MS, AL and IA, across the eastern heartland. But natural increase may have picked up a little in economically stronger states like NY, NJ, IL, IN and WI. Natural increase rates are higher, as might be expected, across the southwest and in Mormon states like Utah and Idaho. The bigger surprise once again is in the the upper Plains, including MN, ND, SD, and NE. Again Washington surprises, behaving like a sunbelt state, due more to an influx of a young population, than high fertility. 

    Immigration. Immigration overall has slowed, but was a relatively significant part of growth for much of the northeast, especially NY, NJ, MA, CT, RI, MD and DE, and remained important in FL, CA, NV, AZ, and WA (and yes Texas, but at a lower rate). The pace of immigration fell most in Nevada and Arizona.

    Domestic migration. This map is the one that most closely reflects the perceived and/or actual attractiveness of the states in the recent past. The states with the highest rates of net out-migration are mainly in the old urban-industrial core, including IL, MI, OH, NY, NJ and even CT, KS in the Plains and now Nevada. Even Alaska, Hawaii and especially California lost through domestic migration. The biggest change is the shift from net out-migration to net gains for the District of Columbia, Louisiana (after years of loss), and especially North Dakota, which made strong gains for the first time in decades. Missouri, New Hampshire, Utah and especially Nevada shifted from net gain to net loss.

    The gains of Texas and Florida, and at a lower rate, North and South Carolina and Tennessee, continue a pattern seen throughout the 2000-2010 decade. But Arizona, Georgia and Virginia have slowed down, and Nevada went from big gains to a loss. The biggest winners are South and especially North Dakota and Montana, in a dramatic turnaround, Colorado, now with the 4th highest rate, and Washington, with the 5th highest. Colorado appears especially popular with retiree migrants, particularly from California. DC and ND, losers for 2000-2009 had the two highest rates of gain for 2010-2011!

    Warning: These trends are fascinating, but we should remember that economic conditions – and even perceived attractiveness of states for cultural or environmental reasons – are volatile and can change again and again.

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist).

  • Somebody has to do it

  • President

  • Citibank, Citizen Wriston, And The Age of Greed

    Robert Sarnoff , the CEO of RCA before it was absorbed by GE, once said, “Finance is the passing of money from hand to hand until it disappears.” That process is very clearly defined in The Age of Greed by Jeffrey Madrick. It recounts, in concise terms, how a few dozen individuals—some in the private sector, some in government–brought us to our current economic pass, in which finance seems to have been completely detached from life. Names from the past come back, and their crimes are explained. Ivan Boesky, Michael Milken, and Dennis Levine look guiltier in the retelling than they did in the newspapers at the time. And in this telling, the philosopher king of the new finance was Walter Wriston, CEO of Citicorp.

    I wrote for Wriston and other senior managers of Citibank from 1980 through his retirement in 1984, and for his successors through 1991. My colleagues and I were charged with helping Wriston make the case that the financial regulatory regime that was put in place during the Depression was obsolete. Let me make it clear: I was a footnote, although I occasionally run into old acquaintances who still shake their fingers at me.

    Madrick’s Wriston is by far the book’s most compelling character. As with all the other subjects, there’s a smattering of armchair Freud, although most of the political figures who make appearances here escape their two minutes on the shrink’s couch. Wriston’s psyche was more interesting than the insecurities of Ivan Boesky and Sandy Weill, to name just two; his university-president father Henry Wriston despised the New Deal as it was happening, and imparted that attitude to the son. Henry then remarried too quickly after Walter’s mother died for the son’s taste, and they became estranged.

    But there’s more to Wriston than you read in Madrick. He was a restless intellect, impatient with field of diplomacy he had studied for before World War II, and after taking a job in banking, which he once wrote seemed like, “the embodiment of everything dull,” found a vehicle for exerting his imagination, and then for fulfilling his ambitions. The First National City Bank, later to become Citibank and Citicorp, and then Citibank again, had inspired imperial dreams before. Through a series of mergers it became the biggest bank in the biggest city in the country. When trade followed the flag around the world, Citibank’s precursors were right there with it. During the Roaring Twenties, Charles Mitchell dreamed of a “bank for all”, the forerunner of Wriston’s vision of one-stop banking, although Mitchell’s stewardship ended with a trial (and an acquittal) after the stock market crash and the Pecora hearings in the early ‘30s. While the bank had social register threads running through its history—when Wriston started the president was James Stillman Rockefeller, descended both from the Stillmans and the Rockefellers, married to a Carnegie—the patrician elements always had hungry outsiders around to push the envelop of banking practice. When Rockefeller was chairman, he had a president named George Moore, and Wriston was his protégé. However, Moore was too frisky for Rockefeller, and when a successor was chosen, it was Wriston.

    Wriston hung a portrait of Friederich Hayek on the wall of his office. He was a reader. When Adam Smith became the Holy Ghost of the Church of Deregulation, Wriston’s top writer (and later my boss) was the man who actually edited The Wealth of Nations for the Great Books. When I was new there, I asked one of the bigshot corporate bankers which great thinkers he liked to quote in his speeches. He answered, “The only person who can get away with that is Walt Wriston, and I’m not sure he can.” Wriston’s ambition may have been shaped by philosophy, but he achieved it with tactics and strategy that sprang from a contrary nature as much as by the force of his ideas, and Madrick recounts that. He wanted his bank to be valued like a growth stock, and promised analysts 15% a year return on equity—not a recipe for safety and soundness.

    Whether it was inventing financial instruments to get around interest rate restrictions, making outsize bets on railroad bonds and New York City bonds, creating the Eurodollar market, blitzing the country with credit cards, or wholesale lending to developing countries to recycle petrodollars, Wriston had a knack for making money when the economy was right and then challenging the government to deregulate in time to accommodate his losses. Personally, I think that before the bank was too big to fail, it was too big to succeed.

    Looked at now, there’s something quaint about these investments. At least they had to do with real things, like trains, oil, municipal governance, and the ostensible aspirations of people in emerging markets, although they were mostly oligarchs and autocrats. In Madrick’s account, Wriston was dismissive of the government’s capacity to efficiently recycle petro-dollars, among many other things, and contended that his loan officers knew more about their corporate customers than anyone else did, which would enable them to safely make riskier loans than capital standards would permit. We all know how that turned out.

    Wriston was a real visionary. To underscore his then-revolutionary idea that information about money was as important as money itself, he bought a transponder on a satellite to carry the bank’s data stream, and then put a satellite on the cover of the annual report. Theoretically, all that proprietary information made it hard to hide bad news about a company’s finances or a country’s; executives and prime ministers beware of poor management! He was undoubtedly the first bank CEO to anticipate what Moore’s Law—quantifying the exponential growth of computing power—would mean to business and society. Unfortunately, that power is exactly what enables the hollow finance we have today.

    Reading Madrick’s book was like watching my life pass before my eyes, including the parts I slept through, and it certainly brought me up to date on events that happened long after my eyes glazed over.

    It reminded me that when Wriston ran it, Citibank was fun to work for, as jobs in tall buildings went. My closest colleagues were well-educated and witty refugees from college faculties. The bank’s historian worked closely with us, and we learned the secrets that never made it into the deadly official history, such as the fact that one of Wriston’s predecessors kept a house in Paris, where he was known among the haute couturiers as le bonbon, or that when the Titanic went down, some hard-money banker had written to customers that there was good news—the loss of all the paper currency aboard would strengthen the dollar. Wriston set the tone: History counted, an attitude that wouldn’t survive the cost-cutting that came later. Wriston was renown for his sharp needle, but when I found myself in his office with the portrait of Hayek staring down, he seemed to enjoy the relief from the routine pressures of his job. I always had some kind of bleeding heart question based on current events, and he always had a sharp, witty retort.

    He was also a citizen. When the City of New York had its own financial collapse in 1975 (“Ford to City: Drop Dead”), Wriston represented the commercial banks on the committee charged with rescuing the city’s finances. One of the bank’s economists assigned to work with him saw the beating Wriston took every day at the hands of the municipal unions and asked why he carried on. He answered, “Because I live here.” I wish some of the new financiers who have benefited from the work Wriston did would exhibit some evidence that they felt that way about the city. About the country. About the world.

    Photo: Bigstockphotos.com; the old Citibank and newer Citicorp buildings.

    Henry Ehrlich no longer writes for bankers, although he still likes money. He is editor of
    www.asthmaallergieschildren.com, and co-author of Asthma Allergies Children: a parent’s guide.

  • California’s Deficit: The Jerry Brown and ‘Think Long’ Debate

    California has three major problems: persistent high unemployment, persistent deficits, and persistently volatile state revenues. Unfortunately, the only one of these that gets any attention is the persistent deficit. It is even more unfortunate that many of the proposals to reduce the deficits are likely to make all three of the problems worse over the long run.

    Two major proposals to deal with the deficit will shape the coming debate. One is from the newly formed Think Long for California Committee; the other from the governor.

    Governor Jerry Brown’s plan would increase sales taxes, and would increase the tax rate on the portion of anyone’s income that is over $250,000 (the marginal rate). It is a general rule of tax analysis that if you want there to be less of something, tax it. Indeed, this proposal would result in some wealthier people leaving California, and it would accelerate the trend of substituting internet retail purchases for local retail purchases.

    It would also increase California’s tax receipt volatility. California’s tax base is dependent on the income of a relatively small group of wealthy people. It turns out that this income is more volatile than the economy. Increasing top marginal tax rates would only increase the volatility of the state’s revenue.

    So, why would the governor make such a silly proposal? I’ve heard a few reasons.

    • The government is starving and it needs the income now.

    This is nonsense. Combined national, state, and local government spending is now over 35 percent of gross product. This is highest it has ever been, including the peak spending years of World War II.

    We can disagree on the optimal size of government, but to argue that this is a time of scarce government spending is absurd.

    • The wealthy have too much money. We must increase the progressivity of California’s tax code.

    The governor’s proposal will do that. If implemented, the plan will give California the highest marginal tax rates in the United States. The problem is that people with high incomes often have more choices than most of us. They can move. They can reallocate earnings to other states or into less-taxed activities. They can just forego earnings if the return is too low.

    Most analysts agree that California’s tax structure should be broader based. The only way to do that is to make the system less progressive, not more progressive. Increasing taxes on the wealthy may feel good when the law is implemented, but it will eventually lead to lower tax revenues, increased revenue volatility, and slower economic growth.

    • There is nothing else we can do. The political situation does not allow a better fix.

    It never will be easy to implement comprehensive tax reform in California. There are too many groups with too much at stake. However, it is senseless to argue that we should therefore increase the distortions in an already distorted tax code. California has been doing this for years, and it just keeps making things worse. California’s governance is a mess precisely because it is the result of hundreds of ad-hoc decisions.

    California desperately needs comprehensive tax reform, “if not now, when?”

    Which brings us to the proposal by the Think Long for California Committee . The Think Long committee is a subset of California’s political elite. You will recognize many of the names; for a start: Nicolas Berggruen, Eli Broad, Willie Brown, Gray Davis, Condoleeza Rice, Bob Hertzberg, Eric Schmidt, Terry Semel, Laura Tyson, and George Schultz. The proposal has three components:

    Empowering Local Governments and Regions: Here’s what it says about decentralizing decision-making: “While the committee embraces the principles of de-centralization, devolution and realignment of revenues and responsibilities, we have not endeavored to propose precisely how that should be accomplished.”

    That’s a bit like endorsing Mom and apple pie, isn’t it? The committee has not earned itself any honor or credibility by failing to have a proposal for one of the three major components of its plan, the first that it enunciates.

    Improving Accountability: “The Citizens Council For Government Accountability – an independent, impartial and non-partisan body – would be established to develop a vision encompassing long-term goals for California’s future.”

    Only, it is not a citizens group at all. It would be funded by the state, and it would have access to state agencies for support. Nine of the committee’s thirteen members would be appointed by the governor, two of whom could not be registered in either party. The Senate Rules Committee and the Speaker of the Assembly would each appoint two members, one from each major party. The committee would have four non-voting ex-officio members: the director of finance, the state treasurer, the state controller, and the attorney general.

    That sounds to me a lot like just another government agency. Not exactly; this would be a super-committee with broad powers. It would soon be involved in almost every aspect of California’s government. The committee would have subpoena power, and the ability to publish on the election ballot its comments and positions on proposed ballot initiatives and referendums, as well as to place initiatives directly on the ballot.

    Giving the committee the ability to place initiatives directly on the ballot is a nice touch in a document that elsewhere tries to make it more difficult for others to place initiatives on the ballot.

    Restructuring the Tax Code: California’s tax code needs restructuring, no doubt about that. This proposal doesn’t get us to where we need to be, though. It reduces sales tax rates, top marginal income and business tax rates, and deductions from personal income taxes, except for education and health care, and for taxing services.

    In general, these are steps in the right direction. However, exempting education and healthcare is a serious, perhaps fatal, flaw. It amounts to a huge subsidy for those industries, and places an extraordinary burden on the remaining service providers. The exempted industries are big, and exempting them means higher taxes on other service providers.

    Who would actually bear the tax burden? That depends on the elasticities of supply and demand. In general, when demand is less elastic than supply (when the consumer is relatively indifferent to price changes), the consumer bears the tax burden, which is what is desired. However, for many services, it would appear that demand is not that inelastic.

    Consumers can easily reduce the frequency of services such as haircuts, lawn maintenance, and the like. This would shift the burden of the tax from the consumer to the provider, that is, the hairdresser or landscape worker. In many cases, these are very low-income workers, making the tax extraordinarily regressive. California’s tax code needs to be less progressive, but this could be a huge regressive swing, one that would create extreme hardships for some of our least advantaged citizens.

    Economic theory is clear that there are fewer distortions in consumption taxes than in income and capital taxes. However, these models assume that the tax burden is squarely placed on the consumer. It appears that for many services this may be impossible. Perhaps that is why we don’t observe many service taxes.

    It is also the case that, in many services, taxes are avoided by the use of cash transactions. Estimates of the size of the “underground economy” vary, but most economists believe it is significant. A tax on services would likely increase its size dramatically.

    The Think Long proposal is not the solution to California’s challenges. It does, however, represent far more thought than went into the governor’s proposal. It provides a service, in that it provides a starting point for a conversation that California desperately needs.

    Photo by Randy Bayne; California Governor Jerry Brown

    Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org

  • A Devastating Verdict for California HSR

    Like many other observers, we have found the California High-Speed Rail Peer Review Group to have made a convincing case for a fresh look at the feasibility of the California high-speed rail project. The group’s report was issued as eleven House Democrats – eight from California – joined an earlier request from twelve Republican House members for an independent GAO investigation of the embattled project. 

    That is why we find Governor Brown’s reaction – that the peer reviewers’ report "does not appear to add any arguments that are new or compelling enough to suggest a change of course” – to be incomprehensible. Either the governor issued the statement without the benefit of having read the report, or else he is so ideologically committed to the project that he refuses to look the facts in the face.

    Precisely which conclusions of the report are not compelling enough, the governor’s spokesman has not made clear. Is it the statement that "the Funding Plan fails to identify any long term funding commitments" and therefore "the project as it is currently planned is not financially feasible"?

    Is it the reviewers’ assertion that "the [travel] forecasts have not been subject to external and public review" and, absent such an open examination, “they are simply unverifiable from our point of view"?

    Could it be their statement that "the ICS [Initial Construction Section] has no independent utility other than as a possible temporary re-routing of the Amtrak-operated San Joaquin service…before an IOS [Initial Operating Segment] is opened"?

    Or, is it the Panel’s conclusion that "…moving ahead on the HSR project without credible sources of funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California?"

    To us, the findings seem at least deserving of a respectful consideration.

    But the California High-Speed Rail Authority (CHSRA) is not ready to concede anything. Here is the opening paragraph of its response: 

    "While some of the recommendations in the Peer Review Group report merit consideration, by and large this report is deeply flawed, in some areas misleading and its conclusions are unfounded. …Although some high-speed rail experience exists among Peer Review Panel members, this report suffers from a lack of appreciation of how high-speed rail systems have been constructed throughout the world, makes unrealistic and unsubstantiated assumptions about private sector involvement in such systems and ignores or misconstrues the legal requirements that govern construction of the high speed rail program in California."

    It is not our intention to delve in detail into the Authority’s response and judge the soundness of its arguments. No doubt, the CHSRA response will come under a detailed examination by the Authority’s critics in the days ahead. Suffice it to say that, having carefully and with an open mind examined the Authority’s rambling nine-page response, we find that it did not satisfactorily rebut the peer group’s central point: that it is not prudent, nor "financially feasible," to proceed with the $6 billion dollar rail project in the Central Valley (including $2.7 billion in Proposition 1A bonds) in the absence of any identifiable source of funding with which to complete even the Initial Operating Segment. To do so, would be to expose the state to the risk of being stuck, perhaps for many years, with a rail segment unconnected to major urban areas and unable to generate sufficient ridership to operate without a significant state subsidy. 

    The Authority’s lashing out at the peer reviewers and the dismissive tone of its response suggest that it has already made up its mind to stay the course and circle the wagons. That is not a wise posture to assume in the face of an already skeptical state legislature. 

  • The U.S. Economy: Regions To Watch In 2012

    In an election year, politics dominates the news, but economics continue to shape people’s lives. Looking ahead to 2012 and beyond, it is clear that the United States is essentially made up of many economies, each with distinctly different short- and long-term prospects. We have highlighted the five regions that are most poised to flourish and help boost the national economy.

    Our list assumes that we will be living in a post-stimulus environment. Even if President Obama is re-elected, it will largely be the result of the unattractive nature of his opposition as opposed to his economic policies. And given it is unlikely the Democrats will regain the House — and they could still lose the Senate — we are unlikely to see anything like the massive spending associated with Obama’s first two years in office.

    Clearly the stimulus helped prop up certain regions, such as New York City, Washington and various university towns, which benefited from the financial bailout, lax fiscal discipline and grants to research institutions. But in the foreseeable future, fundamental economic competitiveness will be more important. Global market forces will prove more decisive than grand academic visions.

    With that in mind, here are our five regions to watch in 2012.

    1. The Energy Belt. Even if Europe falls into recession, demand from China and other developing countries, as well as threats from Iran to cut off the Persian Gulf, will keep energy prices high. While this is bad news for millions of consumers, it could be a great boon to a host of energy-rich regions, particularly in Texas, Oklahoma, the Dakotas, Montana, Louisiana and Wyoming. New technologies that allow for greater production require higher prices than more conventional methods — roughly $70 a barrel — and most experts expect prices to stay above $100 for the next year.

    Goldman Sachs recently predicted that the U.S. will become the world’s largest oil producer by 2017. The bounty is so great that the key energy-producing states have consistently out-performed the national average in terms of job and income growth. Houston, the nation’s energy capital, has enjoyed the fastest growth in per-capita income in the past decade. No reason to expect this to slow down much this year.

    Energy growth, notes Bill Gilmer, senior economist at the Federal Reserve Bank of Dallas, also sparks “upstream” expansion in a host of other industries, such as chemicals and plastics. Massive new expansions to serve the industry are being planned not only in Texas and Louisiana but in former rust belt states, including now gas-rich Ohio. The big exception is oil-rich California, which seems determined to keep its fossil fuels — and the growth they could drive — out of mind and underground.

    2. The Agricultural Heartland. You don’t have to have oil or gas to enjoy a strong economy. Omaha, Neb., is not in the energy belt, but its strong agriculture-based economy keeps its unemployment rate well under 5%. Demand from developing countries — especially China, which is expected to supplant Canada as our No. 1 agricultural market — should boost the nation’s farm income to a record $341 billion.

    Most of the increased product demand lies in commodities like soybeans, corn, barley, rice and cotton. Contrary to the assumptions of East Coast magazines such as The Atlantic, which paint a picture of a devastated and dumb rural America, places like Iowa are doing very well indeed and are likely to continue doing so. Urban economies like Des Moines are also benefiting and expanding into finance and other non-farm related activities. The once massive out-migration from the region has slowed to something like a balance, with increasingly strong in-migration from places like Illinois and California.

    3. The New Foundry. The revival of Great Lakes manufacturing is one of the heartening stories of the past year, but the biggest beneficiaries of American manufacturing’s revival will likely be in the Southeast and along the Texas corridor connected to Mexico. Future big growth will not come from bailed-out General Motors or Chrysler, with their legacy costs and still-struggling quality issues, but from foreign makers — Japanese, German and increasingly Korean — that build highly rated, energy-efficient vehicles. These countries are not just investing in cars; they also have placed steel mills and aerospace facilities in the rising south-facing foundry.

    Foreign companies have good reasons to look to an expanded U.S. base: aging domestic markets, diminishing workforces and a growing concern over China’s tendency to steal technology and favor state-owned firms. This shift from domestic production has been building for years, in large part due to familiar reasons of less unionization and lower business costs. Of the ten foreign auto assembly plants opened or announced between 1997 and 2008, eight were in Southern right-to-work states. As the recovery has taken hold, new expansions are being announced. In 2011 Toyota opened a new plant in the tiny hamlet of Blue Springs, Miss., just 17 miles from Elvis’ hometown of Tupelo, while Mercedes-Benz announced  $350 million to add capacity to its plant just outside of Tuscaloosa.

    4. The Technosphere. Silicon Valley, as well as the Boston area, has thrived under the stimulus, and worldwide demand for technology products will continue to spark some growth in those areas. Over the past year, San Jose-Silicon Valley, Boston and Seattle all stood in the top five in job creation among the country’s 32 largest metro areas. The coming IPO for Facebook and other Valley companies may heighten the tech sector’s already smug sense of well-being.

    Unfortunately for the rest of California, and even more blue-collar Bay Area communities like San Jose and Oakland, high costs and an unfavorable regulatory environment will keep this bubble geographically constrained. Historic patterns, particularly over the past decade, suggest that as the core tech companies expand, they are likely to head  to business-friendly places such as  Salt Lake City, Raleigh and Columbus, Ohio, which have picked up both tech companies and educated migrants from California.

    5. The Pacific Northwest. This is one blue region in the country with excellent prospects. For one thing, both Washington and Oregon enjoy considerable in-migration, in sharp contrast to New York, California and Illinois. They also have a more varied economy than Silicon Valley, with strong companies connected to retail (Amazon, Costco and Starbucks), aerospace (Boeing) and software (Microsoft).

    The Seattle region, home to all these companies,  is the real standout. It ranked first on our recent list of technology regions and third in industrial manufacturing, a trend likely to continue as Boeing expands production of its new 787 Dreamliner. The business climate and the housing costs are somewhat challenging, but more favorable than in California. The Bay Area and Los Angeles continue to send large numbers of migrants to the Puget Sound region. Over the long term, the area also benefits from possessing ample cheap renewable energy (mostly hydro) and water, which are both  in short supply elsewhere.

    These scenarios, of course, could be changed by either world events — such as an unexpected crash in the Chinese economy — or a stunning Democratic sweep in 2012 that would occasion another round of Obamaian stimulus and ever more heavy-handed regulation. Yet barring such developments, expect the back to basics economy to continue enriching these regions best positioned to take advantage of it.

    This piece also appeared at Forbes.com.

    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.

    Photo by BigStockPhoto.com.

  • The Shifting Landscape of Diversity in Metro America

    Census 2010 gave the detail behind what we’ve known for some time: America is becoming an increasingly diverse place.  Not only has the number of minorities simply grown nationally, but the distribution of them among America’s cities has changed. Not all of the growth was evenly spread or did it occur only in traditional ethnic hubs or large, historically diverse cities.

    To illustrate this, I created maps of U.S. metro areas showing their change in location quotient. Location quotient (LQ) measures the concentration of something in a local area relative to its concentration nationally. This is commonly used for identifying economic clusters, such as by comparing the percentage of employment in a particular industry locally vs. its overall national percentage. In a location quotient, a value of 1.0 indicates a concentration exactly equal to the US average, a value greater than 1.0 indicates a concentration greater than the US average, and a value less than 1.0 indicates a concentration less than the US average.

    While commonly used for economic analysis, the math works for many other things. It can be useful to measure how the concentration of particular values changes over time relative to the national average.  In this case, we will examine the change in LQ for various ethnic groups between the 2000 and 2010 censuses for metro areas. Those metro areas with a positive change in LQ grew more concentrated in that ethnic group compared to the US average over the last decade. Those with a negative change in LQ grew less concentrated compared to the nation as a whole, even if they grew total population in that ethnic group.

    To increase concentration level requires growing at a faster percentage than the US as a whole. This is obviously easier for places that start from a low base than those with a high base. In this light, places that have traditionally been ethnic hubs – such as west coast metros for Asians – can grow less concentrated relative to the nation as a whole even if they continue to add a particular ethnic group. Asian population, for example, can grow strongly in California, but at a slower rate than the rest of the country. This is indeed the case as groups like Hispanics and Asians have been de-concentrating from the west coast, and now are showing up in material numbers even in the Heartland.

    Black Population


    Black Only Population, Change in Location Quotient 2000-2010

    The change in Black concentration is particularly revealing. Much has been written about the so-called reversing of the Great Migration. But contrary to media reports, there is no clear monolithic move from North to South. Instead, we see that the outflow has been disproportionately from America’s large tier one metros like New York, Chicago, and Los Angeles. In contrast, Northern cities like Indianapolis, Columbus, and even Minneapolis-St. Paul (home to a large African immigrant community) grew Black population strongly, and actually increased their Black concentrations. Similarly, there were clearly preferred metro destinations in South for Blacks, like Atlanta and Charlotte. Many other Southern metros , particularly those along the Atlantic coast of Georgia and the Carolinas continued to lose their appeal to Blacks, relatively speaking.

    Hispanic Population


    Hispanic Population (of any race), Change in Location Quotient 2000-2010

    Here we see de-concentration clearly in action. The Mexican border regions retained high Hispanic population counts, but they are no longer as dominant as in the past. Places like Nashville, Oklahoma City, and Charlotte particularly stand out for increasing Hispanic population percentage. Again, large traditionally diverse tier one cities like New York and Chicago show declines on this measure as smaller cities are now more in on the diversity game.

    Asian Population


    Asian Only Population, Change in Location Quotient 2000-2010

    Again, we see here that America’s Asian population spread well beyond traditional west coast bastions. There were big increases in Asian population counts, with resulting LQ changes, in places like Atlanta, Indianapolis, Philadelphia, and Boston. Even New York (which now has over one million Asian residents within the city limits alone) and Chicago showed gains among Asians.

    Children (Population Under Age 18)

    As a bonus, here is a look at LQ change for metro areas for people under the age of 18.


    Children (Population Under Age 18), Change in Location Quotient 2000-2010

    Here we see that metros along America’s northern tier now have relatively fewer children than a decade ago, while metros like Denver, Dallas, and Nashville had more. Clearly, some places are increasingly seen as better – and perhaps also more affordable – locations for child rearing than others.  Perhaps unsurprisingly many of the out of favor locales are either expensive, have poor economic prospects, and/or are excessively cold. Not surprisingly, for example, Atlanta, Houston and Florida’s west coast have gained in this demographic while much of the Northeast, particularly upstate New York, have lost out.

    The overall key is while there are certain broad themes that emerge from the recent Census, such as America’s increasing diversity or signs of a reversing of the Great Migration, we need to take a more fine grained view to see which places are in fact benefitting and being hurt by these trends.  What we see here is that traditional large urban bastions of black population and ethnic diversity are no longer the only game in town. Smaller places in the interior and the South are now emerging as diversity magnets in their own right, as well as magnets for families with children. This is the collection of places to watch to look for the next set of great American cities to emerge.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile. Telestrian was used to analyze data and to create maps for this piece.

    Note: The original version of this piece included incorrect charts for the Asian, Hispanic, and child measures.

  • Edward Morgan